PetIQ(US:PETQ)2020-05-08 12:43Financial Performance - Consolidated net sales increased by $38.3 million, or 26%, to $186.8 million for the three months ended March 31, 2020, compared to $148.4 million for the same period in 2019[148]. - Product sales increased by $40.2 million, or 32%, to $166.3 million for the three months ended March 31, 2020, driven by growth in manufactured products[149]. - Service revenue decreased by $1.9 million, or 8%, to $20.5 million for the three months ended March 31, 2020, primarily due to COVID-19 related closures[152]. - Gross profit increased by $7.4 million, or 30%, to $32.2 million for the three months ended March 31, 2020, attributed to significant growth in product sales[153]. - Same-store sales in the Services segment decreased by $2.6 million, or 13%, to $18.2 million for the three months ended March 31, 2020[152]. - Gross margin increased to 17.2% for the three months ended March 31, 2020, from 16.7% for the same period in 2019, driven by higher margin product sales[154]. - Adjusted EBITDA for the three months ended March 31, 2020, was $14.5 million, compared to $10.9 million for the same period in 2019, reflecting an increase in Adjusted EBITDA margin from 7.3% to 7.7%[173]. Expenses and Costs - General and administrative expenses increased by $11.2 million, or 54%, to $31.7 million for the three months ended March 31, 2020, as a percentage of net sales rising from 13.8% to 17.0%[155]. - Interest expense increased by $2.8 million to $4.7 million for the three months ended March 31, 2020, due to additional debt for the Perrigo Animal Health Acquisition[160]. - Services segment Adjusted EBITDA decreased by $3.3 million, or 62%, to $2.0 million for the three months ended March 31, 2020, compared to $5.3 million for the same period in 2019[164]. - Unallocated corporate expenses have grown due to the Company's expansion, including increased administrative headcount through acquisitions[165]. Cash Flow and Working Capital - Net cash used in operating activities was $68.6 million for the three months ended March 31, 2020, compared to $18.2 million for the same period in 2019, reflecting lower earnings and significant expansion in working capital[180]. - Net cash provided by financing activities was $74.2 million for the three months ended March 31, 2020, compared to $6.9 million for the same period in 2019, primarily driven by the utilization of the revolving credit facility[182]. - Working capital as of March 31, 2020, was $185.9 million, an increase from $112.4 million as of December 31, 2019[177]. - The Company had $72.5 million in cash used in operating activities due to changes in assets and liabilities for the three months ended March 31, 2020[180]. Debt and Financing - The Company executed an Asset Purchase Agreement to acquire U.S. rights to Capstar® and CapAction® for $95 million, contingent upon customary closing conditions[146]. - The Company is in the process of arranging financing to complete the Acquisition of Capstar® and CapAction®, with no assurance that financing will be available on advantageous terms[178]. - As of March 31, 2020, cash and cash equivalents were $28.1 million, with $84.3 million outstanding under a revolving credit facility and $219.5 million under a term loan[176]. - As of March 31, 2020, $84.3 million was outstanding under the Amended Revolving Credit Agreement with a weighted average interest rate of 3.1%[187]. - The A&R Term Loan Credit Agreement was increased from $74.1 million to $220.0 million at an interest rate of Eurodollar rate plus 4.50%[188]. - As of March 31, 2020, $219.5 million was outstanding under the A&R Term Loan Credit Agreement[192]. - The Company has variable rate debt of approximately $303.8 million under its Revolver and Term Loan as of March 31, 2020[197]. - An increase of 1% in interest rates would have increased the interest expense for the three months ended by approximately $1.2 million[197]. - The Company entered into a guarantee note of $10.0 million in connection with the VIP Acquisition, with $27.5 million total payable under related notes[194]. - The Company incurred debt issuance costs of $0.1 million related to the A&R Credit Agreement during the three months ended March 31, 2019[195]. - As of March 31, 2020, the borrowers and guarantors were in compliance with all covenants under the Amended Revolving Credit Agreement and A&R Term Loan Credit Agreement[186][191]. Other Information - The mortgage for a commercial building in Eagle, Idaho, has a principal of $1.9 million at a fixed interest rate of 4.35%[193]. - The Company has not experienced any material impact on its internal controls over financial reporting despite remote work due to the COVID-19 pandemic[200].