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Income Taxes (As Restated) | 3 Months Ended
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Jun. 30, 2024
Income Tax Disclosure [Abstract] |
Income Taxes (As Restated) | Income Taxes (As Restated) For the three months ended June 30, 2024 and 2023, the Company recorded an income tax provision of approximately $1.0 million and an income tax benefit of approximately $0.3 million, respectively. The increase in the income tax provision for the three months ended June 30, 2024 is related to the cancellation of the former CEO’s performance stock units resulting in additional $8.7 million of increased income during the quarter. The effective tax rate for the three months ended June 30, 2024 was approximately 20.3%, compared to approximately 20.4% for the three months ended June 30, 2023. The projected full-year effective tax rate used for purposes of the income tax provision for the three month ended June 30, 2024 reflects the $1.8 million impact of a favorable permanent difference associated with the cancellation of the former CEO’s performance restricted shares. No tax benefit was recorded for the original compensation expense due to expected limitation under Sec. 162 (m) and therefore, there is no tax benefit to reverse upon cancellation of the stock. The impact of this favorable permanent difference is partially offset by the tax impacts of stock compensation shortfalls. Under Internal Revenue Code Section 382, if a corporation undergoes an “ownership change”, the corporation’s ability to use its pre-change net operating loss and tax credit carryforwards to offset its post-change income and tax liabilities may be limited. Generally, an ownership change occurs when the equity ownership of one or more stockholders or groups of stockholders who owns at least 5% of a corporation’s stock increases its ownership by more than 50 percentage points over their lowest ownership percentage in a testing period (typically three years). On April 3, 2023, 100% of the issued and outstanding stock of PetCareRx was acquired by the Company. The merger triggered an ownership change of PetCareRx within the meaning of Section 382. As a result of the acquisition, the Company performed a Section 382 analysis to determine if the net operating losses carried forward would have a utilization limitation. Any limitation could result in the expiration of a portion of the federal net operating loss carryforward before utilization, which would reduce the Company's gross deferred tax assets. As of April 3, 2023, and prior to the acquisition, PetCareRx had approximately $96.0 million of net operating losses and $1.9 million of disallowed interest expense. The results of the Section 382 analysis determined the net operating losses and disallowed interest expense in total, would be limited and reduced to approximately $14.5 million.

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