Cover Page
Cover Page - USD ($) $ in Billions | 12 Months Ended | ||
Dec. 31, 2020 | Feb. 19, 2021 | Jun. 30, 2020 | |
Cover [Abstract] | |||
Document Type | 10-K | ||
Document Annual Report | true | ||
Document Period End Date | Dec. 31, 2020 | ||
Current Fiscal Year End Date | --12-31 | ||
Document Transition Report | false | ||
Entity File Number | 001-38794 | ||
Entity Registrant Name | COVETRUS, INC. | ||
Entity Incorporation, State or Country Code | DE | ||
Entity Tax Identification Number | 83-1448706 | ||
Entity Address, Address Line One | 7 Custom House Street | ||
Entity Address, City or Town | Portland | ||
Entity Address, State or Province | ME | ||
Entity Address, Postal Zip Code | 04101 | ||
City Area Code | 888 | ||
Local Phone Number | 280-2221 | ||
Title of 12(b) Security | Common Stock, par value $0.01 per share | ||
Trading Symbol | CVET | ||
Security Exchange Name | NASDAQ | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Interactive Data Current | Yes | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Small Business | false | ||
Entity Emerging Growth Company | false | ||
ICFR Auditor Attestation Flag | true | ||
Entity Shell Company | false | ||
Entity Public Float | $ 1.4 | ||
Entity Common Stock, Shares Outstanding | 136,225,089 | ||
Entity Central Index Key | 0001752836 | ||
Amendment Flag | false | ||
Document Fiscal Year Focus | 2020 | ||
Document Fiscal Period Focus | FY |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions | Dec. 31, 2020 | Dec. 31, 2019 |
Current assets: | ||
Cash and cash equivalents | $ 290 | $ 130 |
Accounts Receivable, net of allowance | 507 | 426 |
Inventories, net | 530 | 636 |
Other receivables | 67 | 67 |
Prepaid expenses and other | 37 | 30 |
Assets held for sale (Note 4) | 0 | 51 |
Total current assets | 1,431 | 1,340 |
Non-current assets: | ||
Property and equipment, net | 116 | 93 |
Operating lease right-of-use asset | 117 | 84 |
Goodwill (Note 8) | 1,187 | 1,154 |
Other intangibles, net (Note 8) | 555 | 643 |
Investments and other | 90 | 45 |
Total assets | 3,496 | 3,359 |
Current liabilities: | ||
Accounts payable | 405 | 520 |
Current maturities of long-term debt and other borrowings (Note 9) | 1 | 62 |
Accrued payroll and related liabilities | 67 | 44 |
Accrued taxes | 37 | 18 |
Other current liabilities | 181 | 164 |
Liabilities held for sale (Note 4) | 0 | 21 |
Total current liabilities | 691 | 829 |
Non-current liabilities: | ||
Long-term debt and other borrowings, net (Note 9) | 1,068 | 1,125 |
Deferred income taxes | 28 | 48 |
Other liabilities | 136 | 94 |
Total liabilities | 1,923 | 2,096 |
Commitments and contingencies (Note 12) | ||
Mezzanine equity: | ||
Redeemable non-controlling interests (Note 13) | 36 | 10 |
Shareholders' equity: | ||
Common stock, $0.01 par value per share, 675,000,000 shares authorized as of December 31, 2020 and December 31, 2019; 136,017,964 and 111,620,507 shares issued and outstanding as of December 31, 2020 and 2019, respectively | 1 | 1 |
Accumulated other comprehensive loss (Note 15) | (66) | (86) |
Additional paid-in capital | 2,629 | 2,339 |
Accumulated deficit | (1,027) | (1,001) |
Total shareholders’ equity | 1,537 | 1,253 |
Total liabilities, mezzanine equity, and shareholders’ equity | $ 3,496 | $ 3,359 |
CONSOLIDATED AND COMBINED BALAN
CONSOLIDATED AND COMBINED BALANCE SHEETS (Parenthetical) - USD ($) $ in Millions | Dec. 31, 2020 | Dec. 31, 2019 |
Statement of Financial Position [Abstract] | ||
Accounts receivable, reserves | $ 5 | $ 8 |
Common stock, par value (in usd per share) | $ 0.01 | |
Common Stock, Shares Authorized | 675,000,000 | 675,000,000 |
Common Stock, Shares, Issued | 136,017,964 | 111,620,507 |
Common Stock, Shares, Outstanding | 136,017,964 | 111,620,507 |
CONSOLIDATED AND COMBINED STATE
CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS - USD ($) shares in Millions, $ in Millions | 12 Months Ended | |||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 29, 2018 | ||
Income Statement [Abstract] | ||||
Net sales (Note 5) | $ 4,339 | $ 3,976 | $ 3,778 | |
Cost of sales | 3,541 | 3,227 | 3,094 | |
Gross profit | 798 | 749 | 684 | |
Operating expenses: | ||||
Selling, general and administrative | 867 | 808 | 547 | |
Goodwill impairment | 0 | 938 | 0 | |
Operating income (loss) | (69) | (997) | 137 | |
Other income (expense): | ||||
Interest income | 1 | 2 | 1 | |
Interest expense | (47) | (56) | (3) | |
Other, net | 91 | 22 | 8 | |
Total income (loss) before taxes and equity in earnings of affiliates | (24) | (1,029) | 143 | |
Income tax benefit (expense) (Note 16) | 7 | 46 | (37) | |
Equity in earnings of affiliates | 0 | 0 | 1 | |
Net income (loss) | (17) | (983) | 107 | |
Net (income) loss attributable to redeemable non-controlling interests | (2) | 3 | (6) | |
Net income (loss) attributable to Covetrus | $ (19) | $ (980) | [1] | $ 101 |
Earnings (loss) per share attributable to Covetrus: (Note 17) | ||||
Basic (in usd per share) | $ (0.22) | $ (9.14) | $ 1.41 | |
Diluted (in usd per share) | $ (0.22) | $ (9.14) | $ 1.40 | |
Weighted-average common shares outstanding: | ||||
Basic (in shares) | 118 | 107 | 71 | |
Diluted (in shares) | 118 | 107 | 72 | |
[1] | (a) Net income earned from January 1, 2019 through February 7, 2019 is attributed to the Former Parent as it was the sole shareholder prior to February 7, 2019 |
CONSOLIDATED AND COMBINED STA_2
CONSOLIDATED AND COMBINED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 29, 2018 | |
Statement of Comprehensive Income [Abstract] | |||
Net income (loss) | $ (17) | $ (983) | $ 107 |
Other comprehensive income (loss), net of tax: | |||
Foreign currency translation gain (loss) | 23 | (3) | (43) |
Unrealized gain (loss) from foreign currency hedging activities | 0 | 0 | (1) |
Gain (loss) on derivative instruments | (3) | (1) | 0 |
Pension adjustment gain | 0 | 0 | 2 |
Total other comprehensive income (loss) | 20 | (4) | (42) |
Comprehensive income (loss) | 3 | (987) | 65 |
Comprehensive (income) loss attributable to redeemable non-controlling interests: | |||
Net (income) loss | (2) | 3 | (6) |
Foreign currency translation (gain) loss | (2) | (1) | 2 |
Comprehensive (income) loss attributable to redeemable non-controlling interests | (4) | 2 | (4) |
Comprehensive income (loss) attributable to Covetrus | $ (1) | $ (985) | $ 61 |
CONSOLIDATED AND COMBINED STA_3
CONSOLIDATED AND COMBINED STATEMENTS OF SHAREHOLDERS' EQUITY - USD ($) $ in Millions | Total | Cumulative Effect, Period of Adoption, Adjustment | Common Stock | Accumulated Other Comprehensive Income (Loss) | Additional Paid-in Capital | Accumulated Deficit | Net Former Parent Investment | Net Former Parent InvestmentCumulative Effect, Period of Adoption, Adjustment | |
Common stock, shares beginning balance (in shares) at Dec. 30, 2017 | 0 | ||||||||
Common stock, shares beginning balance at Dec. 30, 2017 | $ 1,215 | $ 2 | $ 0 | $ (42) | $ 0 | $ 0 | $ 1,257 | $ 2 | |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||
Net income (loss) attributable to Covetrus | $ 101 | 101 | |||||||
Accounting Standards Update [Extensible List] | us-gaap:AccountingStandardsUpdate201409Member | ||||||||
Net increase in Former Parent investment | $ 174 | 174 | |||||||
Series A preferred stock dividend | 0 | ||||||||
Other comprehensive income (loss) | (40) | (40) | |||||||
Common stock, shares outstanding (in shares) at Dec. 29, 2018 | 0 | ||||||||
Common stock, shares ending balance at Dec. 29, 2018 | 1,452 | $ 0 | (82) | 0 | 0 | 1,534 | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||
Net income (loss) attributable to Covetrus | [1] | (980) | (1,001) | 21 | |||||
Dividend to Former Parent | (1,174) | (21) | (1,153) | ||||||
Issuance of shares at Separation (including Share Sale investors) (in shares) | 71,693,426 | ||||||||
Issuance of shares at Separation (including Share Sale investors) | 0 | $ 1 | 566 | (567) | |||||
Issuance of shares in connection with the Acquisition (in shares) | [2] | 39,742,089 | |||||||
Issuance of shares in connection with the Acquisition | [2] | 1,772 | 1,772 | ||||||
Shares canceled (in shares) | [2] | (700,400) | |||||||
Shares canceled | [2] | (30) | (30) | ||||||
Issuance of shares in connection with share-based compensation plans | 885,392 | ||||||||
Issuance of shares in connection with share-based compensation plans | 5 | 5 | |||||||
Net increase in Former Parent investment | 172 | 172 | |||||||
Share-based compensation | 46 | 46 | |||||||
Deferred tax impact of acquisition of non-controlling interest | (7) | (7) | |||||||
Series A preferred stock dividend | 0 | ||||||||
Other | 1 | 1 | |||||||
Other comprehensive income (loss) | $ (4) | (4) | |||||||
Common stock, shares outstanding (in shares) at Dec. 31, 2019 | 111,620,507 | 111,620,507 | |||||||
Common stock, shares ending balance at Dec. 31, 2019 | $ 1,253 | $ 1 | (86) | 2,339 | (1,001) | 0 | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||
Net income (loss) attributable to Covetrus | (19) | (19) | 0 | ||||||
Change in fair value of redeemable securities | (6) | (6) | |||||||
Issuance of shares in connection with share-based compensation plans | 1,793,394 | ||||||||
Issuance of shares in connection with share-based compensation plans | 10 | 10 | |||||||
Share-based compensation | 40 | 40 | |||||||
Series A preferred stock dividend | (7) | (7) | |||||||
Conversion of Series A Preferred stock (in shares) | 22,604,063 | ||||||||
Conversion of Series A preferred stock | 246 | 246 | |||||||
Other comprehensive income (loss) | $ 20 | 20 | |||||||
Common stock, shares outstanding (in shares) at Dec. 31, 2020 | 136,017,964 | 136,017,964 | |||||||
Common stock, shares ending balance at Dec. 31, 2020 | $ 1,537 | $ 1 | $ (66) | $ 2,629 | $ (1,027) | $ 0 | |||
[1] | (a) Net income earned from January 1, 2019 through February 7, 2019 is attributed to the Former Parent as it was the sole shareholder prior to February 7, 2019 | ||||||||
[2] | (b) See Note 3 - Business Acquisitions |
CONSOLIDATED AND COMBINED STA_4
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 29, 2018 | |
Cash flows from operating activities: | |||
Net income (loss) | $ (17) | $ (983) | $ 107 |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||
Depreciation and amortization | 166 | 155 | 64 |
Amortization of right-of-use assets | 24 | 21 | 0 |
Goodwill impairment | 0 | 938 | 0 |
Operating lease right-of-use asset impairment | 8 | 0 | 0 |
Gain on divestiture of a business | (73) | 0 | 0 |
Share-based compensation expense | 40 | 46 | 7 |
Deferred income taxes | (32) | (25) | (5) |
Equity in earnings of affiliates | 0 | 0 | (1) |
Amortization of debt issuance costs | 6 | 5 | 0 |
Loss on managed exit of a business | 7 | 0 | 0 |
Other | (10) | (10) | 0 |
Changes in operating assets and liabilities, net of acquisitions: | |||
Accounts receivable, net | (68) | 13 | (13) |
Inventories, net | 106 | (58) | (42) |
Other assets and liabilities | (19) | (92) | (34) |
Accounts payable and accrued expenses | (85) | 93 | 75 |
Net cash provided by operating activities | 53 | 103 | 158 |
Cash flows from investing activities: | |||
Purchases of property and equipment | (58) | (39) | (22) |
Payments related to equity investments and business acquisitions, net of cash acquired | (54) | (26) | (8) |
Proceeds from divestiture of a business, net | 103 | 0 | 0 |
Proceeds from sale of property and equipment | 4 | 0 | 1 |
Net cash used for investing activities | (5) | (65) | (29) |
Cash flows from financing activities: | |||
Proceeds from revolving credit facility | 190 | 0 | 0 |
Repayment of revolving credit facility | (190) | 0 | 0 |
Proceeds from the issuance of debt | 0 | 1,220 | 0 |
Principal payments of debt | (122) | (43) | (2) |
Debt issuance and amendment costs | (5) | (24) | 0 |
Dividend paid to Former Parent | 0 | (1,174) | 0 |
Issuance of common shares in connection with share-based compensation plans | 10 | 5 | 0 |
Net transfers from Former Parent | 0 | 165 | 274 |
Distributions to non-controlling shareholders | 0 | 0 | (10) |
Proceeds from issuance of Series A preferred stock | 250 | 0 | 0 |
Series A preferred stock issuance costs | (6) | 0 | 0 |
Series A preferred stock dividends | (6) | 0 | 0 |
Acquisition payments | (17) | (9) | 0 |
Acquisitions of non-controlling interests in subsidiaries | 0 | (74) | (382) |
Net cash provided by (used for) financing activities | 104 | 66 | (120) |
Effect of exchange rate changes on cash and cash equivalents | 8 | 3 | (2) |
Net change in cash and cash equivalents | 160 | 107 | 7 |
Cash and cash equivalents, beginning of period | 130 | 23 | 16 |
Cash and cash equivalents, end of period | 290 | 130 | 23 |
Supplemental disclosures of cash payments: | |||
Interest | 40 | 47 | 0 |
Income taxes | 24 | 18 | 12 |
Amounts included in the measurement of operating lease liabilities | 27 | 25 | 0 |
Supplemental disclosures of cash payments: | |||
Conversion of Series A preferred stock | 245 | 0 | 0 |
Right-of-use assets obtained in exchange for new operating lease liabilities | 56 | 104 | 0 |
Right-of-use assets obtained in exchange for new finance lease liabilities | 0 | 1 | 0 |
Deconsolidation of a subsidiary | $ 15 | $ 0 | $ 0 |
Business Overview and Significa
Business Overview and Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2020 | |
Accounting Policies [Abstract] | |
Business Overview and Significant Accounting Policies | BUSINESS OVERVIEW AND SIGNIFICANT ACCOUNTING POLICIES Business Covetrus, Inc. is a global animal-health technology and services company dedicated to supporting the companion, equine, and large-animal veterinary markets. On February 7, 2019, Henry Schein completed the spin-off of its Animal Health Business and transferred the applicable assets, liabilities, and ownership interests to us (the “Separation”) and distributed all the shares of our common stock that were then owned by Henry Schein to its stockholders of record as of January 17, 2019 (the “Distribution”). Also, on February 7, 2019 and prior to the Distribution, we sold $361 million in shares to accredited institutional investors (the “Share Sale”). The proceeds from the Share Sale were paid to us and distributed to Henry Schein. Concurrent with the Distribution, we paid a cash dividend of $1.2 billion from loan proceeds from our newly established credit facility (see Note 9 - Long-Term Debt and Other Borrowings, Net). We then acquired Vets First Choice in an all-stock transaction (the “Acquisition”). Immediately following the Share Sale, Distribution, and Acquisition, on a fully diluted basis, (i) approximately 63% of our outstanding common stock was owned by (a) shareholders of Henry Schein and the Share Sale investors, and (b) specific employees of the Animal Health Business who held certain equity awards, and (ii) approximately 37% was owned by (a) shareholders of Vets First Choice, and (b) certain employees of Vets First Choice who held certain equity awards. On February 8, 2019, our common stock began regular-way trading under the symbol “CVET” on the Nasdaq Global Select Market. Basis of Presentation and Principles of Consolidation We prepared the accompanying consolidated and combined financial statements in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). Except as otherwise specifically noted, the combined financial statements and other financial information for the fiscal year ended December 29, 2018 relate to the Animal Health Business, as this period predates the February 7, 2019 effective date of the Acquisition. This Form 10-K does not include the historical financial results of Vets First Choice for the fiscal year ended December 29, 2018 and does not include any pro forma financial statements of Covetrus. Beginning with the Quarterly Report on Form 10-Q for the quarter ended March 31, 2019, Covetrus began reporting on a consolidated basis, representing the combined operations of the Animal Health Business and Vets First Choice and their respective subsidiaries. The Animal Health Business is deemed the acquirer in this combination for accounting purposes under GAAP, therefore, the Animal Health Business is considered Covetrus’ predecessor and the historical combined financial statements of the Animal Health Business prior to February 7, 2019 are reflected in Covetrus’ quarterly and annual reports as Covetrus’ historical financial statements. The accompanying consolidated and combined 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. All significant intercompany transactions and balances are eliminated in consolidation. All intracompany transactions have been eliminated and all intercompany transactions between the Animal Health Business and Henry Schein have been eliminated in the combined financial statements as such transactions were deemed to not have occurred between us and Henry Schein. 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. The combined financial statements include expense allocations for (i) certain corporate functions historically provided by Henry Schein, including accounting, legal, information services, planning, compliance, investor relations, administration and communication, and similar costs, (ii) employee benefits and incentives, and (iii) share-based compensation. These expenses have been allocated to the Animal Health Business based on direct usage when identifiable, with the remainder allocated on a pro rata basis of net sales, headcount, or other measures of the Animal Health Business and Henry Schein. The Animal Health Business believes the bases on which the expenses have been allocated are a reasonable reflection of the utilization of services provided to, or the benefit received by, the Animal Health Business during the periods presented. The allocations may not, however, reflect the actual expenses that the Animal Health Business would have incurred as a standalone company for the periods presented. Actual costs that may have been incurred if the Animal Health Business had been a standalone company would depend on a number of factors, including the chosen organizational structure, what functions were outsourced or performed by employees, and strategic decisions made in areas such as information technology and infrastructure. Following the Separation, these functions have been performed using our own resources or third-party service providers. As of December 31, 2020, we exited all our transition services agreements with our Former Parent. During the fourth quarter ended December 31, 2020, we recorded a revision to deferred tax assets associated with investment in partnerships. The revision to deferred tax assets to correct for the overstatement was $42 million. We have concluded that this adjustment was not material to any previously issued financial statements. See Note 16 - Income Taxes . Certain immaterial prior period amounts were reclassified to conform to the current presentation. Use of Estimates Preparing financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements and accompanying notes. Changes in circumstances could cause actual results to differ materially from these estimates. The most significant estimates include our evaluation of goodwill impairment, deferred taxes, contingencies, intangible assets acquired, fair value measurements, share-based compensation, self-insurance reserves, and supplier rebates. Fiscal Year During fiscal year 2018, we operated on a 52-53-week basis ending on the last Saturday of December. For fiscal year 2019, we adopted a last day of the calendar year accounting and operating cycle. We made this change on a prospective basis and did not adjust operating results for periods prior to 2019 as the results were not material. Unless otherwise indicated, year-end 2020, 2019, and 2018 refer to our fiscal years ended December 31, 2020, December 31, 2019, and December 29, 2018, respectively. Revenue Recognition We recognize revenue when a customer obtains control of promised goods or services in an amount that reflects the consideration that we expect to receive for those goods or services. To recognize revenue, we do the following: • Identify the contract(s) with a customer • Identify the performance obligations in the contract • Determine the transaction price • Allocate the transaction price to the performance obligations in the contract • Recognize revenue when, or as, the entity satisfies a performance obligation Our revenue is generated from the following major product categories: • Supply Chain Services - primarily includes the sale of animal-health consumable products, including our own proprietary and Covetrus-branded products, small equipment, laboratory products, large equipment, equipment repair services, branded and generic pharmaceuticals, vaccines, surgical products, diagnostic tests, infection-control products, parasiticides, and vitamins and supplements to wholesale and retail customers. Our value-added practice solutions include equipment repair, inventory management, e-commerce, as well as continuing education services for practitioners. • Software Services - includes practice management software systems for veterinary practitioners and animal-health clinics, client communication services, reminders, data backup services, and hardware sales and support. • Prescription Management - includes the distribution of finished goods pharmacy products, specialty pharmaceutical compounding, e-commerce, shipping, manufacturer incentives, service fees, and data integration and support services. We estimate the transaction price at contract inception, including any variable consideration, and update the estimate each reporting period for any changes in circumstances. Variable consideration, including provisions for discounts, rebates to customers, customer returns, and other contra revenue adjustments is included in the transaction price at contract inception by estimating the most likely amount based upon historical data and estimates and are provided for in the period in which the related sales are recognized. Many of our contracts with customers require us to take possession of the inventory, provide the goods or services, and establish the price for the goods or services. Revenue and cost of sales from this type of contract are recognized on a gross basis. From time to time, certain contracts require us to arrange for the procurement of goods or services on behalf of our customer, but we do not purchase or take title of the product from the supplier before they are transferred to our customer. In this type of contract, we are acting as an agent, and revenue is recognized on a net basis (revenue less cost of sales is included in Net sales) (“Net Agency Revenue”), as the supplier is the primary obligor, bears the inventory and credit risk, establishes the price, determines the product specifications, and the amount is fixed. Payment terms differ by customer and jurisdiction and generally range from 30 to 60 days. Supply Chain Services Revenue derived from the sale of consumable products is recognized at a point in time when control transfers to the customer. Such sales typically entail high-volume, low-dollar orders shipped using third-party common carriers. We believe that the shipment date is the most appropriate point in time indicating control has transferred to the customer, because we have no post-shipment obligations, and this is when legal title and risks and rewards of ownership transfer to the customer, and we have an enforceable right to payment. Revenue derived from the sale of equipment is recognized when control transfers to the customer. This generally occurs when the equipment is delivered. Such sales typically entail scheduled deliveries of large equipment primarily by equipment service technicians. Some equipment sales require minimal installation which is typically completed at the time of delivery. Our products generally carry standard warranty terms provided by the manufacturer, however, in instances where we provide warranty labor services, the warranty costs are accrued in the period the related revenue is recognized. Software Services Revenue derived from the sale of software products is recognized when products are shipped to customers or made available electronically. Such software is generally installed by customers and does not require extensive training due to the nature of its design. Revenue derived from post-contract customer support for software, including annual support, is generally recognized over the life of the support period while revenue from training services is recognized over the period the services are provided. Prescription Management Revenue under this category is primarily generated from two sources: (i) prescription management and pharmacy services (including the distribution of finished goods products, specialty pharmaceutical compounding, shipping, manufacturer incentives, and service fees), which is recognized when control transfers to the customer, typically upon shipment or delivery, and (ii) data integration and support services (including software as a service, initial setup to connect customers to hosted software applications, data conversions, custom software developments, upgrades and enhancements, training, software configuration, and technical support), which is recognized over the period the services are provided. Other Revenue Revenue derived from other sources, including freight charges and equipment repairs, is recognized when the related product revenue is recognized or when the services are provided. We applied the practical expedient to treat shipping and handling activities performed after the customer obtains control as fulfillment activities, rather than a separate performance obligation in the contract. Certain of our revenue is derived from bundled arrangements that include multiple distinct performance obligations that are accounted for separately. When we sell software products together with related services (e.g., training and technical support), we allocate revenue to software using the residual method, utilizing an estimate of our standalone selling price to estimate the fair value of the undelivered elements. Bundled arrangements that include elements that are not considered software consist primarily of equipment and the related installation service. We allocate revenue for such arrangements based on the relative selling prices of the goods or services. If an observable selling price is not available because we do not sell the goods or services separately, we use one of the following techniques to estimate the standalone selling price: (i) adjusted market approach, (ii) cost-plus approach, or (iii) the residual method. There is no specific hierarchy for the use of these methods, but the relative selling price reflects our best estimate of what the selling prices of each deliverable would be if it were sold regularly on a standalone basis, taking into consideration the cost structure of the business, technical skill required, customer location, and other market conditions. Sales, value-add, and other taxes we collect concurrently with revenue-producing activities are excluded from revenue, and are recorded as liabilities and included in Accrued taxes. See Note 5 - Revenue from Contracts with Customers and Note 20 - Segment Data for additional disclosures. Contract Balances Contract balances represent amounts presented in the consolidated balance sheets when we have either transferred goods or services to the customer or the customer has paid consideration to us under the contract. These contract balances include accounts receivable, contract assets, and contract liabilities. Accounts Receivable The carrying amount of Accounts receivable is reduced by an allowance that reflects our best estimate of the amounts that are not expected to be collected. We estimate and reserve for our expected credit loss exposure based on our experience with past due accounts, write-off history, the aging of accounts receivable, our analysis of customer data, current economic conditions, and reasonable and supportable future forecasts. From time to time, we adjust our assumptions for anticipated changes in any of these or other factors expected to affect collectability. Accounts receivable balances are written off when it is probable that all contractual payments due will not be collected. Contract Assets Contract assets include amounts related to any conditional right to consideration for work completed as of the reporting date and generally represent amounts owed to us by customers, but not yet billed. Contract assets are transferred to accounts receivable when the right becomes unconditional. Current contract assets are included in Prepaid expenses and other and non-current contract assets are included in Investments and other within the consolidated balance sheets. The contract assets primarily relate to the bundled arrangements for the sale of equipment and consumables and sales of term software licenses. Contract Liabilities Contract liabilities are comprised of advance payments and deferred revenue amounts. Contract liabilities are transferred to revenue once the performance obligation has been satisfied. Current contract liabilities are included in Other current liabilities and non-current contract liabilities are included in Other liabilities within the consolidated balance sheets. The contract liabilities primarily relate to advance payments from customers and upfront payments for service arrangements provided over time. Cash and Cash Equivalents We classify all highly liquid short-term instruments with an original maturity of three months or less as cash equivalents. We maintain cash depository accounts with high-quality banks throughout the world. Our cash on deposit in the U.S. may at times exceed federally insured limits. We have not incurred any related losses for the years ended December 31, 2020, December 31, 2019, and December 29, 2018. Inventories Inventories consist primarily of finished goods and are valued at the lower of cost or net realizable value. When inventory is adjusted to net realizable value, the corresponding adjustment is included in Cost of sales. Cost is determined by the first-in, first-out method for merchandise or actual cost for large equipment and high-tech equipment. In accordance with our policy for inventory valuation, we consider many factors, including the condition and salability of the inventory, historical sales, forecasted sales, and market and economic trends. From time to time, we adjust our assumptions for anticipated changes in any of these or other factors expected to affect the value of inventory. We record a liability for unconditional purchase commitments with contract suppliers for quantities greater than future demand forecasts consistent with excess and obsolete inventory valuations. As of December 31, 2020 and 2019, we did not record any liability related to excess unconditional purchase commitments. We are subject to a concentration of risk with our suppliers, as five suppliers accounted for approximately 50% of our purchases for the years ended December 31, 2020 and 2019. Assets and Liabilities Held for Sale Assets and liabilities are considered held for sale when certain criteria are met, including when management has committed to a plan to sell the asset, the asset is available for sale in its immediate condition, and the sale is probable within one year of the reporting date. Assets and liabilities held for sale are reported at the lower of cost or fair value less costs to sell. See Note 4 - Divestitures and Equity Method Investments. Shipping and Handling Costs Freight and other direct shipping costs are included in Cost of sales. Direct handling costs, which represent primarily direct compensation costs of employees who pick, pack, and otherwise prepare, if necessary, merchandise for shipment to customers, are reflected in Selling, general and administrative. Advertising Advertising costs are charged to operations when incurred as part of Selling, general and administrative. We receive reimbursements from certain vendors for advertising costs. Reimbursements for advertising costs are reported on a net basis within Selling, general and administrative. When reimbursements received are more than the cost of advertising, the net amount is reported within Cost of sales. Advertising expense was $17 million in 2020, $17 million in 2019, and $16 million in 2018. Additionally, advertising and promotional costs incurred in connection with direct marketing, including product catalogs and printed materials, are deferred and amortized on a straight-line basis over the period that is benefited, typically one year. Deferred direct marketing expenses included in Prepaid expenses and other were not material in 2020 and 2019. Supplier Rebates We receive quarterly and annual performance rebates from suppliers based upon attainment of certain purchase or sales goals. Supplier rebates are included as a reduction of Cost of sales and are recognized over the period they are earned. The factors considered in estimating supplier rebate accruals include forecasted inventory purchases and sales in conjunction with supplier rebate contract terms, which generally provide for increasing rebates based on either increased purchase or sales volume. Property and Equipment Property and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation is computed primarily under the straight-line method. Amortization of leasehold improvements is computed using the straight-line method over the lesser of the useful life of the assets or the lease terms. See Note 6 - Property and Equipment, Net. Capitalized software costs consist of costs to purchase and develop software for internal use. Costs incurred during the application development stage for software bought and further customized by outside suppliers, software developed by a supplier for proprietary use, and costs incurred for our own personnel who are directly associated with software development are capitalized. Income Taxes We account for income taxes under an asset and liability approach that requires the recognition of deferred income tax assets and liabilities for the expected future tax consequences of events that have been recognized in the financial statements or tax returns. In estimating future tax consequences, we generally consider all expected future events other than enactments of changes in tax laws or rates. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized as income or expense in the period of the enactment date. See Note 16 - Income Taxes . Our tax provision for fiscal years 2019 and 2018 were prepared utilizing the separate return methodology as if we had not been included in a consolidated or group income tax return with Henry Schein. Current income tax liabilities are presented based on current amounts owed for the current tax year for entities that file separate returns. Current taxes payable for entities that joined in a consolidated or group filing with Henry Schein were settled in Net Former Parent investment consistent with other intercompany obligations. Redeemable Convertible Preferred Stock We classified our redeemable convertible preferred stock issued on May 19, 2020 as mezzanine equity on our consolidated balance sheets as the redemption features were outside of our control. We recorded redeemable convertible preferred stock at fair value upon issuance, net of any issuance costs. Our redeemable convertible preferred stock was converted during the year ended December 31, 2020. See Note 14 - Redeemable Convertible Preferred Stock. Redeemable Non-Controlling Interests Some minority equity owners in certain of our subsidiaries have the right, at certain times, to require us to acquire their ownership interest in those entities. As a result of these redemption features, we record the non-controlling interests as redeemable and classify them as mezzanine equity on our consolidated balance sheets initially at their acquisition-date fair value. The non-controlling interests are adjusted each reporting period for income (or loss) attributable to the non-controlling interests. A measurement period adjustment, if any, is then made to adjust the non-controlling interests to the higher of redemption value or carrying value each reporting period. These adjustments are recognized through retained earnings and are not reflected in net income or net income attributable to Covetrus. See Note 13 - Redeemable Non-controlling Interests . Share-based Compensation Share-based compensation represents the cost related to share-based awards granted to employees and non-employee directors, which are measured at the grant date fair value. We recognize share-based compensation expense, net of estimated expected forfeitures, on a straight-line basis over the requisite service period of the award, which is included in Selling, general and administrative in our consolidated and combined statements of operations. Foreign Currency Translation and Transactions The financial position and results of operations of our foreign subsidiaries are determined using local currency as the functional currency. Assets and liabilities of these subsidiaries are translated at the exchange rate in effect at each year end. Statement of operations accounts are translated at the average rate of exchange prevailing during the year. Translation adjustments arising from the use of differing exchange rates from period to period are included in Accumulated other comprehensive loss in equity. Gains and losses resulting from foreign currency transactions are included in earnings. Derivatives Our global business exposes us to risks related to changes in foreign currency exchange rates and interest rates. Our financial risk management program is designed to manage the exposure arising from cash flow variability and uses derivative financial instruments to minimize this risk. We do not enter into derivative financial instruments for trading or speculative purposes. For cash flow hedges, the changes in the fair value of the derivative are recorded as a component of Accumulated other comprehensive income (loss) and subsequently reclassified into earnings in the period(s) during which the hedged transaction affects earnings. We classify the cash flows related to hedging activities in the same category on the consolidated and combined statements of cash flows as the cash flows related to the hedged item. See Note 10 - Derivatives. Business Acquisitions The net assets of businesses acquired are recorded at their fair value at the acquisition date and the consolidated and combined financial statements include their results of operations from that date. Any excess of acquisition consideration over the fair value of identifiable net assets acquired is recorded as goodwill. The major classes of assets and liabilities that we generally allocate purchase price to, excluding goodwill, include identifiable intangible assets (e.g., trademarks and trade names, customer relationships and lists, and non-compete agreements), accounts receivable, inventory, property and equipment, deferred taxes, and other current and long-term assets and liabilities. The estimated fair value of identifiable intangible assets is based on critical estimates, judgments, and assumptions derived from analysis of market conditions, discount rate, discounted cash flows, customer retention rates, and estimated useful lives. See Note 3 - Business Acquisitions. Goodwill As noted in Business Acquisitions above, our Goodwill is derived when we acquire another company. Goodwill is not amortized, but the potential impairment of goodwill is assessed at least annually (on October 1st) and on an interim basis whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Impairment analysis for goodwill requires a comparison of the fair value to the carrying value of a reporting unit. Some important factors that could trigger an interim impairment review include: • Significant underperformance relative to expected historical or projected future operating results, • Significant changes in the manner of the use of acquired assets or our overall business strategy (e.g., decision to divest a business), • Sustained decline in our share price and a resulting decrease in our market capitalization, or • Significant negative industry or economic trends. See Note 8 - Goodwill and Other Intangibles, Net and Note 11 - Fair Value . Long-lived Assets Long-lived assets, other than goodwill, are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable through the estimated undiscounted future cash flows derived from such assets. Definite-lived intangible assets consist primarily of non-compete agreements, trademarks, patents, customer relationships, and product development. For long-lived assets used in operations, impairment losses are only recorded if the asset’s carrying amount is not recoverable through its undiscounted, probability-weighted future cash flows. We measure the impairment loss based on the difference between the carrying amount and the estimated fair value. When impairment exists, the related assets are written down to fair value. See Note 8 - Goodwill and Other Intangibles, Net. Leases We evaluate whether an arrangement is or contains a lease at contract inception. For all our leases, we determine the classification as either operating or financing. Leases with an initial term of 12 months or less are not recognized on the balance sheet. We have lease agreements with both lease and non-lease components, which are generally accounted for together as a single lease component. We recognize lease expense for these leases on a straight-line basis over the lease term. For purposes of calculating operating lease liabilities, lease terms may be deemed to include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use the incremental borrowing rate which is based on similarly secured borrowings available to us at commencement date in determining the present value of future lease payments. We use the implicit rate when readily determinable. S ee Note 7 - Leases . Equity Method Investments Equity investments are accounted for using the equity method of accounting if the investment gives us the ability to exercise significant influence, but not control, over an investee. Equity method investments are included within Investments and other on our consolidated balance sheets. Our share of the earnings or losses as reported by equity method investees, amortization of basis differences, related gains or losses, and impairments, if any, are recognized in Equity in earnings of affiliates on our consolidated and combined statements of operations. Each reporting period, we evaluate whether declines in fair value below carrying value are other-than-temporary and if so, we write down the investment to its estimated fair value. See Note 4 - Divestitures and Equity Method Investments. Cost of Sales The primary components of Cost of sales include the cost of the product (net of purchase discounts, supplier chargebacks, and rebates) and inbound and outbound freight charges. Our distribution network costs, such as purchasing, receiving, inspections, warehousing, internal inventory transfers, and other related costs are included in Selling, general and administrative along with other operating costs. Cost of sales also includes costs directly related to the design and production of software, distribution of licenses, hardware and costs related to services provided, and amortization of the capitalized costs for internally generated software for resale. Amortization of intangible assets is also included within our Cost of sales if the costs and expenses related to the specific class of intangible assets are directly linked with revenue-generating activities. We include the amortization of our product formulas within Cost of sales as these formulas are directly tied to the production of compounded products as alternatives to back-ordered solutions, patient-specific customized medications, and in-clinic use medications. Amortization expense for intangible assets that are not directly related to sales-generating activities is included in Selling, general and administrative expenses. Loss Contingencies We are subject to loss contingencies, including claims with customers and vendors, pending and potential legal actions for damages, investigations relating to governmental laws and regulations, and other matters arising out of the normal course of our business. We record a liability when we believe that it is probable that a loss has been incurred and the amount can be reasonably estimated. If we determine that a loss is reasonably possible and the loss or range of loss can be estimated, we disclose the possible loss in the notes to our financial statements. See Note 12 - Commitments and Contingencies . Comprehensive Income Comprehensive income (loss) includes certain gains and losses that, under GAAP, are excluded from net income as such amounts are recorded directly as an adjustment to equity. Comprehensive income (loss) is primarily comprised of net income, foreign currency translation |
Novel Coronavirus Disease 2019
Novel Coronavirus Disease 2019 ("COVID-19") | 12 Months Ended |
Dec. 31, 2020 | |
Unusual or Infrequent Items, or Both [Abstract] | |
Novel Coronavirus Disease (COVID-19) | NOVEL CORONAVIRUS DISEASE 2019 (“COVID-19”) The COVID-19 pandemic developed throughout 2020 and in response to the pandemic, measures were and continue to be instituted, including phased temporary closures of non-essential businesses throughout many of the regions in which we conduct operations. Veterinary care has been deemed an essential business in most of these regions and we continue to deliver products and services to our customers and their animal-owner clients. In addition, most of our customers are generally able to continue their operations by following new social distancing guidelines which, depending on local regulations, can include telehealth and animal curbside check-in and drop-off at clinics. To date, we continue to experience limited disruption to our results of operations from the COVID-19 pandemic. However, the COVID-19 pandemic continues to create volatility and unpredictability to our business, including shifts in timing and channel mix, inventory replenishment, reduced travel and entertainment expenses due to travel restrictions, expected extension of our workforce working from home based on the local regulations in areas where we operate, as well as other changes. We believe our allowance for credit losses related to our accounts receivable is adequate as of December 31, 2020, due to the essential nature of our customers' businesses, as noted above, as well as the historic behavior of our large customer base. As the COVID-19 pandemic continues, there could be an increase in the aging of our accounts receivable, however, we do not anticipate a significant increase in defaults for such accounts receivable. During the first quarter ended March 31, 2020, we experienced a sustained decline in our share price and a resulting decrease in our market capitalization due to the overall macroeconomic effects of the COVID-19 pandemic. Due to this overall market decline and the uncertainty surrounding COVID-19, we concluded that a triggering event occurred and conducted an interim impairment review of our goodwill as of March 31, 2020. We tested for goodwill impairment by quantitatively comparing the fair value of our North America reporting unit (the only reporting unit currently bearing goodwill) to its carrying amount. Using the income-based approach, fair value exceeded the carrying amount as of March 31, 2020. We did not experience triggering events during the remainder of 2020. We conducted our annual goodwill impairment testing and determined that our fair value significantly exceeds our carrying value of goodwill. We have taken the following actions to help ensure that our business has flexibility to mitigate potential effects from continued global economic pressure: • During the quarter ended March 31, 2020, we borrowed funds under our revolving line of credit to increase our cash position and provide flexibility. In May 2020, we issued 7.50% Series A Convertible Preferred Stock (“Series A Preferred Stock”) which have since been fully converted, and we used a portion of the $244 million aggregate net proceeds to repay borrowings under our revolving line of credit. See Note 9 - Long-Term Debt and Other Borrowings, Net and Note 14 - Redeemable Convertible Preferred Stock • We reduced our non-critical, near-term planned capital expenditures • We negotiated for extended payment terms on certain contracts • We managed our inventory levels in line with expected demand • We instituted cost containment measures including temporary executive, board, and other senior-level employee compensation reductions, employee furloughs in certain European countries, certain shift eliminations, a temporary hiring freeze, discretionary spending deferrals, deferred payroll taxes as available under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), and temporarily suspended our 401(k) employer match During the second half of 2020, we returned to pre-COVID-19 compensation levels and reinstated our 401(k) employer match. We continue to monitor our business performance and take a cautious yet balanced approach in managing our expenses due to uncertainty created by the COVID-19 pandemic. Some of the measures we implement from an expense management perspective may continue as we transform our business. The temporary cost containment measures described above were beneficial to our Selling, general and administrative (“SG&A”) expenses for 2020; however, costs incurred to grow our business outpaced the decreases we experienced through containment. Absent the cost containment measures, our SG&A expenses would have increased further. Risk and Uncertainties The duration and severity of COVID-19-related potential disruptions and the actions we have taken, and may take in the future, in response thereto, involve risks and uncertainties, and it is not possible at this time to estimate the impact that COVID-19 could have on our business. The impact of COVID-19 on various business activities in affected countries could adversely affect our estimates, results of operations, and financial condition. |
Business Acquisitions
Business Acquisitions | 12 Months Ended |
Dec. 31, 2020 | |
Business Combinations [Abstract] | |
Business Acquisitions | BUSINESS ACQUISITIONS Vets First Choice On February 7, 2019, we acquired Vets First Choice. See Note 1 - Business Overview and Significant Accounting Policies . During the third quarter ended September 30, 2019, we recorded a measurement period adjustment, which was made to reflect the facts and circumstances in existence as of the acquisition date. This adjustment reflected a reduction to the purchase price of $30 million, offset by a corresponding decrease to goodwill. This measurement period adjustment related to the cancellation of 700,400 Covetrus shares issued to Vets First Choice shareholders that were held in escrow. During the fourth quarter ended December 31, 2019, we recorded a final measurement period adjustment of $4 million which decreased the deferred tax liability with a corresponding decrease to goodwill. The estimated consideration and fair value in the tables below have been updated to reflect this measurement period adjustment. The acquisition date fair value of the consideration transferred consisted of the following: Estimated Consideration Total Covetrus shares issued to Vets First Choice shareholders 39,041,689 Per share price (in actuals) (a) $ 43.05 Total fair value of shares issued to Vets First Choice shareholders $ 1,681 Fair value of Vets First Choice replacement stock option awards attributable to pre-acquisition service 62 Vets First Choice debt repaid at close 24 Vets First Choice expenses paid at close 18 Less: Vets First Choice cash used to fund transaction (9) Total consideration $ 1,776 (a) Closing price on February 7, 2019, Covetrus shares trading on a when-issued basis (Nasdaq: CVETV) The purchase price was allocated to the underlying assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition. The following table summarizes the allocation of the purchase price to the assets acquired and liabilities assumed: Estimated Fair Value Fair value of net assets acquired $ 14 Goodwill 1,324 Intangible assets 545 Deferred tax liabilities (107) Total acquisition cost $ 1,776 We determined the estimated fair value of the identifiable intangible assets after review and consideration of relevant information including discounted cash flow analysis, market data, and management’s estimates. We engaged an independent valuation firm to assist in determining the fair value of the acquired intangible assets. The value attributed to the other identifiable intangible assets included $20 million in trademarks and trade names, $50 million in product formulas, $125 million in customer relationships, and $350 million in developed technologies. The useful lives of trademarks and trade names is 5 years, product formulas is 11 years, customer relationships is 11 years, and developed technologies is 5 years. These intangible assets are being amortized over a weighted-average period of seven years. The goodwill from this transaction arose because of our expected ability to leverage existing and new marketing opportunities across a larger revenue base. The goodwill from this transaction is not deductible for tax purposes. The results of operations of Vets First Choice are included in our consolidated results of operations since February 7, 2019, during which period Vets First Choice contributed revenue of $246 million and net loss of $525 million. The following unaudited pro forma financial information presents the results of operations for the years ended December 31, 2019 and December 29, 2018 as if the Acquisition had occurred as of December 31, 2017. The unaudited pro forma results reflect certain adjustments for items that are not expected to have a continuing impact, such as adjustments for transaction costs incurred, management fees, and purchase accounting. The information presented below has been prepared for comparative purposes only and does not purport to be indicative of either future results of operations or the results of operations that would have occurred had the Acquisition been consummated on December 31, 2017: Years Ended December 31, 2019 December 29, 2018 Net sales $ 4,000 $ 3,981 Goodwill impairment $ 938 $ — Net income (loss) $ (983) $ (63) Net income (loss) attributable to Covetrus $ (980) $ (63) Veterinary Study Groups On October 7, 2020, we acquired an 80% interest in Veterinary Study Groups, Inc., which manages a family of more than 50 Veterinary Management Groups in the United States and Canada. The goodwill from this transaction is not deductible for tax purposes. The results of operations have been included in our North American segment since the acquisition date. This transaction is not a material business combination. The acquisition expenses incurred were not material. See Note 8 - Goodwill and Other Intangibles, Net and Note 13 - Redeemable Non-controlling Interests. Other |
Divestitures and Equity Method
Divestitures and Equity Method Investment | 12 Months Ended |
Dec. 31, 2020 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Divestiture and Equity Method Investments | DIVESTITURES AND EQUITY METHOD INVESTMENTS Divestitures On April 1, 2020, we completed the divestiture of our scil animal-care business (“scil”) to Heska Corporation for $110 million pursuant to an amended purchase agreement. During the year ended December 31, 2020, we recorded a pre-tax gain of $73 million included in Other, net in our consolidated and combined statements of operations which reflects a $1 million foreign exchange adjustment for the finalization of the purchase price. It was primarily included within our Europe segment. During the third quarter of 2020, we announced a managed exit of the operations of our French distribution business specializing in medicines, pet food, equipment, and services for veterinary clinics. We accrued $6 million in severance costs based on French statutory requirements and $1 million of other costs associated with this decision. We ceased operations as of December 31, 2020, including the sale of certain assets. Equity Method Investments On April 30, 2020, we completed the previously announced combination of our subsidiary, Spain Animal Health Solutions S.L.U. (“SAHS”), with Distrivet, S.A. to form a leading animal-health provider on the Iberian Peninsula. We contributed SAHS by means of a contribution in kind of all the shares of SAHS in exchange for the transfer of shares from shareholders of Distrivet, S.A. (“Distrivet Shareholders”). In addition, at closing, we made a payment of $11 million and we are obligated to make an additional payment of approximately $13 million on the one-year anniversary. As a result of these transactions, we now own 50.01% of the new company, called Distrivet, a Covetrus company (“Distrivet”). Based on Distrivet's governance structure, we do not have power over key financial and operating decisions that are made in the ordinary course of business. Accordingly, our investment in Distrivet is accounted for under the equity method and Distrivet is considered a related party. See Note 19 - Related-Party Transactions. The Investment and Shareholders Agreement of Distrivet, S.A. (“Agreement”) executed on January 13, 2020, contains put and call options on the shares owned by the Distrivet Shareholders, representing up to 49.99%, that are exercisable at fair market value based on floor and ceiling prices tied to Earnings Before Interest, Taxes, Depreciation, and Amortization (“EBITDA”) multiples as specified in the Agreement. See Note 11 - Fair Value. During the second quarter of 2020, we deconsolidated SAHS, remeasured our retained investment initially at a fair value of $45 million, which was included in Investments and other in our consolidated balance sheets, and recognized a gain of $1 million, which was included in Other, net in our consolidated and combined statements of operations. The fair value was measured using third-party valuation models and was determined using both the market approach and income approach, which includes discounted expected cash flows. As of December 31, 2020, the carrying amount of our investment in Distrivet was $50 million which was included in Investments and other in our consolidated balance sheets. |
Revenue from Contracts with Cus
Revenue from Contracts with Customers | 12 Months Ended |
Dec. 31, 2020 | |
Revenue from Contract with Customer [Abstract] | |
Revenue from Contracts with Customers | REVENUE FROM CONTRACTS WITH CUSTOMERS Disaggregation of Revenue The tables below presents our revenue disaggregated by major product category and reportable segment: Year Ended December 31, 2020 Supply Chain Services Software Services Prescription Management Eliminations Total North America $ 1,969 $ 78 $ 406 $ (76) $ 2,377 Europe 1,574 10 — (13) 1,571 APAC & Emerging Markets 394 8 — — 402 Eliminations (11) — — — (11) Total Net sales $ 3,926 $ 96 $ 406 $ (89) $ 4,339 Year Ended December 31, 2019 Supply Chain Services Software Services Prescription Management Eliminations Total North America $ 1,816 $ 82 $ 246 $ (33) $ 2,111 Europe 1,513 10 — (14) 1,509 APAC & Emerging Markets 361 7 — — 368 Eliminations (12) — — — (12) Total Net sales $ 3,678 $ 99 $ 246 $ (47) $ 3,976 Year Ended December 29, 2018 Supply Chain Services Software Services Prescription Management Eliminations Total North America $ 1,858 $ 83 $ — $ (2) $ 1,939 Europe 1,462 11 — (10) 1,463 APAC & Emerging Markets 380 7 — — 387 Eliminations (11) — — — (11) Total Net sales $ 3,689 $ 101 $ — $ (12) $ 3,778 Contract Balances The following table presents information about our receivables and contract liabilities from contracts with customers: Balance Sheet Location December 31, 2020 December 31, 2019 Accounts receivable: Accounts receivable, net Accounts receivable, net $ 507 $ 426 Contract liabilities: Deferred revenue, current Other current liabilities $ 22 $ 37 For the years ended December 31, 2020 and 2019, our contract assets and long-term contract liabilities were determined to be immaterial. For the year ended December 31, 2020, deferred revenue recognized from performance obligations completed this period approximates the balance outstanding as of December 31, 2019. Performance Obligations Estimated future revenues expected to be generated from long-term contracts with unsatisfied performance obligations as of December 31, 2020 were not material. |
Property and Equipment, Net
Property and Equipment, Net | 12 Months Ended |
Dec. 31, 2020 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment, Net | PROPERTY AND EQUIPMENT, NET Property and equipment, net consisted of the following as of: Estimated Useful Life December 31, December 31, Land N/A $ 1 $ 1 Buildings and permanent improvements 10-40 years 10 9 Leasehold improvements Lesser of the useful life or lease terms 21 20 Machinery and warehouse equipment 2-12 years 45 44 Furniture, fixtures, and other 2-10 years 46 36 Computer equipment and software 2-10 years 76 57 Capital in progress 23 10 Total property and equipment, gross 222 177 Less: accumulated depreciation and amortization (106) (84) Total Property and equipment, net $ 116 $ 93 The following table sets forth our depreciation and amortization expense related to property and equipment: Years Ended Location 2020 2019 2018 Cost of sales $ 1 $ 3 $ 2 Selling, general and administrative 30 25 13 Total depreciation and amortization expense $ 31 $ 28 $ 15 |
Leases
Leases | 12 Months Ended |
Dec. 31, 2020 | |
Leases [Abstract] | |
Leases | LEASES We have office space, warehouse facilities, vehicles, and equipment under non-cancelable operating leases with third parties. The leases have remaining lease terms of 1 to 14 years. Rent expense charged to operations under operating leases during the years ended December 31, 2020 and 2019 was $30 million and $25 million, respectively. Common Area Maintenance and taxes for the years ended December 31, 2020 and 2019 was $3 million and $2 million, respectively. Short-term lease expense and variable rent expense for the years ended December 31, 2020 and 2019 were not material. Rent expense, under ASC 840, was $20 million for the year ended December 29, 2018. The following table presents the lease balances within the consolidated balance sheets and other supplemental information related to our leases as of: December 31, 2020 December 31, 2019 Operating Leases: Operating lease right-of-use assets, net $ 117 $ 84 Accrued expenses, other $ 22 $ 19 Other liabilities 107 67 Total operating lease liabilities $ 129 $ 86 Finance Leases: Property and equipment, net $ 1 $ 2 Current maturities of long-term debt and other borrowings $ 1 $ 1 Total finance lease liabilities $ 1 $ 1 Weighted-average remaining lease term: Operating leases 8.1 years 6.8 years Finance leases 2.5 years 2.4 years Weighted-average discount rate: Operating leases 3.5 % 3.5 % Finance leases 3.8 % 8.1 % The following table presents the maturities of our lease liabilities as of December 31, 2020: Operating Leases Finance Leases 2021 $ 26 $ 1 2022 21 — 2023 18 — 2024 15 — 2025 12 — Thereafter 57 — Total minimum lease payments 149 1 Less: amount representing interest (20) — Present value of net minimum lease payments 129 1 Less: current portion of lease obligations (22) (1) Long-term lease obligations $ 107 $ — As of December 31, 2020, we had additional operating leases that have not yet commenced which included the following: Description Commencing Lease Term Total Future Lease Payments Compounding pharmacy Expected 2021 20 years $ 28 New corporate headquarters Expected 2021 20 years 78 Total $ 106 |
Leases | LEASES We have office space, warehouse facilities, vehicles, and equipment under non-cancelable operating leases with third parties. The leases have remaining lease terms of 1 to 14 years. Rent expense charged to operations under operating leases during the years ended December 31, 2020 and 2019 was $30 million and $25 million, respectively. Common Area Maintenance and taxes for the years ended December 31, 2020 and 2019 was $3 million and $2 million, respectively. Short-term lease expense and variable rent expense for the years ended December 31, 2020 and 2019 were not material. Rent expense, under ASC 840, was $20 million for the year ended December 29, 2018. The following table presents the lease balances within the consolidated balance sheets and other supplemental information related to our leases as of: December 31, 2020 December 31, 2019 Operating Leases: Operating lease right-of-use assets, net $ 117 $ 84 Accrued expenses, other $ 22 $ 19 Other liabilities 107 67 Total operating lease liabilities $ 129 $ 86 Finance Leases: Property and equipment, net $ 1 $ 2 Current maturities of long-term debt and other borrowings $ 1 $ 1 Total finance lease liabilities $ 1 $ 1 Weighted-average remaining lease term: Operating leases 8.1 years 6.8 years Finance leases 2.5 years 2.4 years Weighted-average discount rate: Operating leases 3.5 % 3.5 % Finance leases 3.8 % 8.1 % The following table presents the maturities of our lease liabilities as of December 31, 2020: Operating Leases Finance Leases 2021 $ 26 $ 1 2022 21 — 2023 18 — 2024 15 — 2025 12 — Thereafter 57 — Total minimum lease payments 149 1 Less: amount representing interest (20) — Present value of net minimum lease payments 129 1 Less: current portion of lease obligations (22) (1) Long-term lease obligations $ 107 $ — As of December 31, 2020, we had additional operating leases that have not yet commenced which included the following: Description Commencing Lease Term Total Future Lease Payments Compounding pharmacy Expected 2021 20 years $ 28 New corporate headquarters Expected 2021 20 years 78 Total $ 106 |
Goodwill and Other Intangible A
Goodwill and Other Intangible Assets, Net | 12 Months Ended |
Dec. 31, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Other Intangible Assets, Net | GOODWILL AND OTHER INTANGIBLES, NETGoodwill During the first quarter of 2019, in connection with the Separation, Distribution, and Acquisition, we made changes to our organizational and reporting structure. With these changes, we revised our reportable segments and goodwill was reallocated to the new reporting segments. See Note 20 - Segment Data. In August 2019, we released our results for the three and six months ended June 30, 2019 which failed to meet expectations and included a downward revision to our previously provided full-year guidance for the year ended December 31, 2019. We experienced a sustained decline in our share price and a resulting decrease in our market capitalization. These events triggered an interim impairment review as of August 31, 2019. Based on our analysis, we determined that the carrying value of our reporting units exceeded their fair value and recorded an impairment charge. See Note 11 - Fair Value for further information. The changes in the Goodwill balances by segment for the years ended December 31, 2020 and December 31, 2019 were as follows: North America Europe APAC & Emerging Markets Total Balance at December 29, 2018 (a) $ 529 $ 172 $ 49 $ 750 Foreign currency translation — (8) (1) (9) Goodwill additions 1,280 57 16 1,353 Goodwill impairment (653) (221) (64) (938) Divestitures and related adjustments (b) (2) — — (2) Balance at December 31, 2019 1,154 — — 1,154 Goodwill additions (c) 33 — — 33 Balance at December 31, 2020 $ 1,187 $ — $ — $ 1,187 (a) Recast to conform to 2019 presentation (b) Attributable to scil; see Note 4 - Divestitures and Equity Method Investments (c) See Note 3 - Business Acquisitions North America Europe APAC & Emerging Markets Total Accumulated impairment as of December 31, 2019 $ (653) $ (221) $ (64) $ (938) Accumulated impairment as of December 31, 2020 $ (653) $ (221) $ (64) $ (938) Other Intangibles, Net We periodically review our long-lived assets for indications of impairment to determine if the carrying value is recoverable and exceeds fair value. The carrying amount of long-lived assets is not recoverable if it exceeds the sum of undiscounted cash flows expected as a result from use and eventual disposition of the asset. Definite-lived intangible assets consisted of the following as of: December 31, 2020 Cost (a) Accumulated Net Customer relationships $ 526 $ (265) $ 261 Trademarks 64 (33) 31 Patents 30 (28) 2 Product development 403 (143) 260 Non-compete agreements 2 (1) 1 Total Other intangibles $ 1,025 $ (470) $ 555 (a) Includes $45 million primarily related to customer relationships; see Note 3 - Business Acquisitions December 31, 2019 Cost Accumulated Net Customer relationships $ 503 $ (234) $ 269 Trademarks 60 (28) 32 Patents 30 (24) 6 Product development 406 (71) 335 Non-compete agreements 2 (1) 1 Total Other intangibles $ 1,001 $ (358) $ 643 Other intangible assets were established through business acquisitions. We amortize intangible assets on a straight-line basis over their estimated useful lives. The table below sets forth amortization of intangible assets: Years Ended Location 2020 2019 2018 Cost of sales $ 5 $ 4 $ — Selling, general and administrative 130 123 49 Total amortization $ 135 $ 127 $ 49 The estimated future amortization of intangible assets as of December 31, 2020 is as follows: 2021 $ 131 2022 128 2023 114 2024 59 2025 22 Thereafter 101 Total $ 555 |
Long-term Debt and Other Borrow
Long-term Debt and Other Borrowings, Net | 12 Months Ended |
Dec. 31, 2020 | |
Debt Disclosure [Abstract] | |
Long-term Debt and Other Borrowings, Net | LONG-TERM DEBT AND OTHER BORROWINGS, NET Long-term debt and other borrowings, net consisted of the following as of: Commencement Date Maturity Date Rate as of December 31, 2020 December 31, 2020 December 31, 2019 Revolving line of credit February 2019 February 2024 — % $ — $ — Term loan payable in quarterly installments of $15 million began March 31, 2020 February 2019 February 2024 2.6 % 1,080 1,200 Loan payable with balloon payment due at maturity February 2019 March 2023 4.0 % 6 6 Finance lease obligations 1 1 Total 1,087 1,207 Less: current maturities (1) (62) Total Long-term debt and other borrowings $ 1,086 $ 1,145 Less: unamortized debt discount (18) (20) Total Long-term debt and other borrowings, net $ 1,068 $ 1,125 On February 7, 2019, we entered into a $1.5 billion syndicated credit agreement with a five-year term (the “Credit Facility”) primarily to pay a dividend to Henry Schein, as well as provide funding for working capital and general corporate purposes. The Credit Facility is comprised of the following: Total Amount Amount Available as of December 31, 2020 Term loan $ 1,200 $ — Revolving line of credit (a) 300 299 Total Credit Facility (b) $ 1,500 $ 299 (a) Letters of credit reduce our borrowing capacity under the revolving line of credit. At December 31, 2020, we had $1 million for letters of credit outstanding against the total $35 million sub-limit available (b) We paid $28 million of debt issuance costs related to the Credit Facilities which we deferred and amortize on an effective yield basis to interest expense In February 2020, the Credit Facility was amended, and the revised terms are reflected below. The term loan and revolving line of credit bear interest on a floating rate basis at our option, according to a leverage-based pricing grid and incur fees as follows: • LIBOR (ranging from one month to 12 months) subject to a floor of 0.00% ◦ plus, an applicable margin ranging from 1.25% to 2.50% annually based on our leverage ratio at the end of the prior quarter. • Alternative base rate determined as 1.00% plus the highest of the Prime Rate, Federal Funds Rate plus 0.50%, or one month LIBOR ◦ plus, an applicable margin ranging from 0.25% to 1.50% annually based on our leverage ratio at the end of the prior quarter. • Unused capacity under the revolving line of credit loan incurs a fee ranging from 0.175% to 0.400% per annum based on our leverage ratio at the end of the prior quarter. • Additionally, customary letter of credit fees, as well as fronting fees, are incurred for letters of credit outstanding. The applicable margins on LIBOR and alternative base rate borrowings fluctuated over the course of 2020. As of December 31, 2020, the applicable margins on LIBOR and alternative base rate borrowings were 1.75% and 0.75%, respectively, for both the term loan and revolving line of credit. The commitment fee for the revolving line of credit as of December 31, 2020 was 0.25%. Starting March 31, 2020, the term loan began amortizing in quarterly installments equal to 5.00% per annum of the initial borrowed amount and requires full payment at maturity of all remaining amounts owed. No amortizing payments are required for the revolving line of credit, however all amounts owed are due at maturity. We have the option to prepay both the term loan and revolving line of credit without penalty, subject to certain conditions. If the aggregate balance of loans outstanding exceeds the lender's commitments made to the revolving line of credit at any time, then the amount of such excess is required to be repaid. Mandatory prepayments of the term loan are required in an amount equal to the net cash proceeds of, subject to specific conditions, (i) certain assets sales, (ii) certain debt offerings, and (iii) certain insurance recovery and condemnation events. Additionally, the Credit Facility limits or restricts our ability, subject to certain exceptions, to: • Incur additional indebtedness • Make dividends and other restricted payments • Incur additional liens • Consolidate, merge, sell, or otherwise dispose of all or substantially all assets • Make investments • Transfer or sell assets • Enter into restrictive agreements • Change the nature of the business • Enter certain transactions with affiliates On April 10, 2020, we used $45 million in net cash proceeds from the sale of scil (see Note 4 - Divestitures and Equity Method Investments ) to prepay our remaining quarterly principal amortization term loan payments for 2020. On December 31, 2020, we prepaid $60 million of scheduled term loan amortization payments for 2021. Following this prepayment, the next quarterly principal amortization term loan payment of $15 million is due on March 31, 2022. Starting April 1, 2019, we were required to maintain a net interest coverage ratio of greater than 3.00x at the end of each quarter and a leverage ratio of less than 5.50x, which latter financial covenant was to begin stepping down with the quarter ended June 30, 2020. We amended our Credit Facility primarily to delay the step down of our leverage ratio covenant from 5.50x to 5.00x until our second quarter ending June 30, 2021. The leverage ratio covenant steps down to 4.50x for the quarter ending December 31, 2021 and then to 3.75x for the quarter ending June 30, 2022 and thereafter. We continuously monitor our compliance with the terms and conditions of our Credit Facility and take such actions as are necessary to attain and ensure compliance. We were in compliance with all financial covenants as of and for the year ended December 31, 2020. The Credit Facility is guaranteed by Covetrus, the subsidiary borrower, and its subsidiary guarantors. We have pledged substantially all tangible and intangible assets, as well as our ownership interests in certain subsidiary companies, in support of the Credit Facility. The following table presents the maturities of our Long-term debt and other borrowings, net as of December 31, 2020: Credit Facility Other Debt Total Repayments 2021 $ — $ 1 $ 1 2022 60 — 60 2023 60 6 66 2024 960 — 960 Total debt maturities 1,080 7 1,087 Less: current maturities — (1) (1) Less: unamortized debt issuance costs (18) — (18) Long-term maturities $ 1,062 $ 6 $ 1,068 |
Derivatives
Derivatives | 12 Months Ended |
Dec. 31, 2020 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivatives | DERIVATIVES We are exposed to the impact of changes in interest rates in the normal course of business. Our financial risk management program is designed to manage the exposure arising from this cash flow risk and uses derivative financial instruments to minimize this risk. We do not enter into derivative financial instruments for trading or speculative purposes. In July and August 2019, we executed interest rate swap contracts with notional amounts aggregating $500 million that are designated as cash flow hedges to manage interest rate risk on our floating rate debt. These interest rate swap contracts adjust the amount of our total debt that is subject to variable interest rates by effectively fixing the borrowing rates on a portion of our floating rate debt discussed in Note 9 - Long-Term Debt and Other Borrowings, Net . Our interest rate swap agreements exchange payment streams based on the notional principal amount. These agreements fix our future interest rates ranging from 1.63% to 1.70% plus the applicable margin as provided in our debt agreement on an amount of our debt principal equal to the then-outstanding swap notional amount. The base notional for these agreements matures on July 31, 2021. On the interest rate swap inception dates, we designated the swaps as a hedge of the variability in cash flows we pay on our variable rate borrowings. The following table discloses the fair value and balance sheet location of our derivative instruments: Liability Derivatives Cash Flow Hedging Instruments Balance Sheet Location December 31, 2020 December 31, 2019 Interest rate swap contracts Other liabilities $ 5 $ 1 At inception of the hedging contract, we used statistical regression to assess the effectiveness of the interest rate hedges. The hedging contracts were deemed highly effective and are expected to be highly effective throughout the hedge period. Therefore, we perform a qualitative assessment of the hedge effectiveness at each subsequent quarterly reporting date. Derivative gains and losses are initially reported as a component of Other comprehensive (loss) income and subsequently recorded in the consolidated statement of operations when the hedged transaction was recognized in earnings. The effect of cash flow hedges on our consolidated and combined statements of operations was as follows: Years Ended December 31, Cash Flow Hedging Instruments Location 2020 2019 Interest rate swap contracts Interest (income) expense $ 5 $ 1 |
Fair Value
Fair Value | 12 Months Ended |
Dec. 31, 2020 | |
Fair Value Disclosures [Abstract] | |
Fair Value | FAIR VALUE GAAP defines fair value as the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. GAAP establishes a fair value hierarchy that distinguishes between (i) market participant assumptions developed based on market data obtained from independent sources (observable inputs), and (ii) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). We have certain financial assets and liabilities that are measured at fair value on a recurring basis, certain nonfinancial assets and liabilities that may be measured at fair value on a nonrecurring basis, and certain financial assets and liabilities that are not measured at fair value in our consolidated balance sheets, but the fair value is disclosed. The fair value disclosures of these assets and liabilities are based on a three-level hierarchy, which is defined as follows: • Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities • Level 2 - Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability • Level 3 - Unobservable inputs for the asset or liability Assets and Liabilities that are Measured at Fair Value on a Recurring Basis The following table presents our financial instruments measured at fair value on a recurring basis and indicates the level within the fair value hierarchy: Assets Level December 31, 2020 December 31, 2019 Distrivet call option (a) 3 $ 2 $ — Total assets $ 2 $ — (a) At investment date fair value, the Distrivet call option had a fair value of $0 million Liabilities Level December 31, 2020 December 31, 2019 Interest rate swap contracts 2 $ 5 $ 1 Distrivet put option (a) 3 1 — Total liabilities $ 6 $ 1 (a) At investment date fair value, the Distrivet put option had a value of $5 million Interest Rate Swap Contracts Our derivatives at December 31, 2020 consisted of five interest rate swap contracts which are over-the-counter and not traded through an exchange. The fair values of our swap contracts are determined based on inputs that are readily available in public markets or can be derived from information available in publicly quoted markets. See Note 10 - Derivatives. Distrivet Options The Distrivet options fair value were derived from a Monte Carlo simulation methodology. The significant unobservable inputs utilized in this Level 3 fair value measurement includes the enterprise value of Distrivet ($156 million), volatility (30%), and cost of capital (15%). We regularly evaluate each of the assumptions used in establishing the asset and liability. Significant changes in assumptions could result in significantly lower or higher fair value measurements. See Note 4 - Divestitures and Equity Method Investments. Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis Assets that are measured at fair value on a nonrecurring basis primarily relate to Property and equipment, net, Operating lease right-of-use assets, net, Goodwill, and Other intangible assets, net. We do not periodically adjust carrying value to fair value for these assets; rather, the carrying value of the asset is reduced to its fair value when we determine that impairment has occurred. At August 31, 2019, assets measured at fair value on a nonrecurring basis consisted of Goodwill. The fair value measurement of goodwill was measured using both the market approach and income approach, which includes discounted expected cash flows. As the discounted cash flows include unobservable inputs that were significant to the fair value measurement, the fair value was classified as a Level 3 measurement within the fair value hierarchy. See Note 8 - Goodwill and Other Intangibles, Net . At September 30, 2020, we recorded an operating lease right-of-use asset impairment of $8 million included in Selling, general and administrative in our consolidated and combined statements of operations in our North American segment as this asset group was not recoverable based on COVID-19's effect on the subleasing market as well as other asset group specific factors. The fair value of the operating lease right-of-use asset was $8 million, determined using the discounted expected cash flow. The significant unobservable inputs utilized in this Level 3 fair value measurement included market rent assumptions and discount rate. Assets and Liabilities that are not Measured at Fair Value Financial Assets and Liabilities The carrying amounts reported on the consolidated balance sheets for Cash and cash equivalents, Accounts receivable, net, Other receivables, Accounts payable, and Accrued expenses approximate their fair value due to the short maturity of those instruments. Long-Term Debt Our Long-term debt is classified as a Level 2 instrument. The carrying amount of the term loan approximates fair value given the underlying interest rate applied to such amounts outstanding is currently reset to the prevailing monthly market rate. See Note 9 - Long-Term Debt and Other Borrowings, Net. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | COMMITMENTS AND CONTINGENCIESWe are involved in various legal proceedings that arise in the ordinary course of business. Substantial judgment is required in predicting the outcome of these legal proceedings, many of which take years to adjudicate. We accrue estimated costs for a contingency when we believe that a loss is probable and can be reasonably estimated. Legal fees are expensed as incurred. No material accrued loss contingencies were recorded as of December 31, 2020. Securities Litigation Matter On September 30, 2019, the City of Hollywood (Florida) Police Officers' Retirement System filed a putative securities class action lawsuit in the United States District Court for the Eastern District of New York, purportedly on behalf of purchasers of Covetrus common stock from February 8, 2019 through August 12, 2019, against the Company, Henry Schein, Inc., our former Chief Executive Officer and President, and our former Chief Financial Officer (“Defendants”). The complaint alleges that Defendants violated Sections 10(b) and 20(a) of the Exchange Act by making allegedly false and misleading statements and omissions, primarily regarding the Company’s financial prospects and the integration costs relating to the business combination involving the Animal Health Business and Vets First Choice. The suit seeks unspecified damages, fees, interest, and costs. We intend to defend the matter vigorously. Given the uncertainty of litigation, the preliminary stage of the case, and the legal standards that must be met for, among other things, class certification and success on the merits, we cannot estimate the reasonably possible loss or range of loss that may result from this action. Purchase Obligations We are party to an exclusive supply arrangement for certain products within the U.S. market. We amended this arrangement in February 2020 to extend the purchase obligations until 2025. The following table presents the remaining unconditional purchase obligations as of December 31, 2020: Year Amount 2021 $ 8 2022 8 2023 7 2024 7 2025 6 Total $ 36 We paid $8 million in 2020, $9 million in 2019, and $9 million in 2018 for products purchased under this exclusive arrangement. Our forecasted sales for products under this exclusive supply arrangement exceed our purchase obligations. |
Redeemable Non-controlling Inte
Redeemable Non-controlling Interests | 12 Months Ended |
Dec. 31, 2020 | |
Noncontrolling Interest [Abstract] | |
Redeemable Non-controlling Interests | REDEEMABLE NON-CONTROLLING INTERESTS The following table presents the components of change and balances of Redeemable non-controlling interests within the consolidated and combined balance sheets as of: December 31, December 31, December 29, Balance at beginning of period $ 10 $ 92 $ 368 Decrease due to redemptions (4) (74) (383) Increase due to business acquisitions (a) 24 — 6 Net income (loss) attributable to redeemable non-controlling interests 2 (3) 6 Dividends paid — — (10) Effect of foreign currency translation (gain) loss attributable to redeemable non-controlling interests (2) 1 (2) Change to redemption value 6 (6) 107 Balance at end of period $ 36 $ 10 $ 92 (a) See Note 3 - Business Acquisitions |
Redeemable Series A Convertible
Redeemable Series A Convertible Preferred Stock | 12 Months Ended |
Dec. 31, 2020 | |
Schedule of Investments [Abstract] | |
Redeemable Series A Convertible Preferred Stock | REDEEMABLE CONVERTIBLE PREFERRED STOCK On May 19, 2020, we issued 250,000 shares of our 7.50% Series A Preferred Stock, with a par value of $0.01 per share, for an aggregate purchase price of $250 million, or $1,000 per share, pursuant to an Investment Agreement (the “Investment Agreement”) with CD&R VFC Holdings, L.P. (the “Purchaser”), an affiliate of Clayton, Dubilier & Rice, LLC (“CD&R”), dated April 30, 2020. We received net proceeds of $244 million after issuance costs and used the proceeds to provide additional short-term liquidity and support general corporate purposes. Our right to elect a conversion was triggered on September 4, 2020, when the closing share price of our common stock was $22.29 , which marked the twentieth trading day in a period of thirty consecutive trading days that our volume weighted-average stock price closed above $22.20 (which was equal to 200% of the conversion price for the Series A Preferred Stock of $11.10 in effect at that time). On September 9, 2020, we converted a portion of our Series A Preferred Stock to 14.4 million shares of common stock in accordance with the terms of the Investment Agreement. On November 18, 2020, we converted the remaining 90,632 shares of our Series A Preferred Stock into 8.2 million shares of common stock. Under the terms of the Investment Agreement, the Purchaser appointed two designees to our Board of Directors (see Note 19 - Related-Party Transactions ). |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Income (Loss) | 12 Months Ended |
Dec. 31, 2020 | |
Equity [Abstract] | |
Accumulated Other Comprehensive Income (Loss) | ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) Comprehensive income (loss) includes certain gains and losses that are excluded from Net income (loss) under GAAP as these amounts are recorded directly as an adjustment to total equity. The following table presents the changes in Accumulated other comprehensive loss, net of applicable taxes, by component: Derivative Gain (Loss) Gain (Loss) on Pension Adjustment Foreign Currency Translation Gain (Loss) Unrealized Gain (Loss) from Foreign Currency Hedging Total Balance as of December 30, 2017 $ — $ (2) $ (41) $ 1 $ (42) Other comprehensive income (loss) attributable to Covetrus before reclassifications — 2 (41) (1) (40) Period change — 2 (41) (1) (40) Balance as of December 29, 2018 — — (82) — (82) Other comprehensive income (loss) attributable to Covetrus before reclassifications (1) — (4) — (5) Reclassified from Accumulated other comprehensive loss to earnings 1 — — — 1 Period change — — (4) — (4) Balance as of December 31, 2019 — — (86) — (86) Other comprehensive income (loss) attributable to Covetrus before reclassifications (8) — 21 — 13 Reclassified from Accumulated other comprehensive loss to earnings 5 — 2 — 7 Period change (3) — 23 — 20 Balance as of December 31, 2020 $ (3) $ — $ (63) $ — $ (66) We recognized foreign currency translation gains (losses) as a component of comprehensive income (loss) due to changes in foreign exchange rates from the beginning of the period to the end of the period. The consolidated and combined financial statements are denominated in the U.S. dollar currency. Fluctuations in the value of foreign currencies as compared to the U.S. dollar may have a significant impact on our comprehensive income (loss). The tax effect on accumulated unrealized losses on derivative instruments, unrealized pension adjustment gains, and gains recognized on derivative instruments was immaterial for all years presented. See Note 10 - Derivatives . |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | INCOME TAXES Income (loss) before taxes and equity in earnings of affiliates were as follows: Years Ended December 31, December 31, December 29, Domestic $ (164) $ (809) $ 59 Foreign 140 (220) 84 Total income (loss) before taxes and equity in earnings of affiliates $ (24) $ (1,029) $ 143 The provisions for income taxes were as follows: Years Ended December 31, 2020 December 31, 2019 (as revised) December 29, 2018 Current income tax (benefit) expense: U.S. federal $ 1 $ — $ 13 State and local 2 2 4 Foreign 22 16 25 Total current income tax (benefit) expense 25 18 42 Deferred income tax (benefit) expense: U.S. federal (25) (46) — State and local (1) (10) — Foreign (6) (8) (5) Total deferred income tax (benefit) expense: (32) (64) (5) Total income tax (benefit) expense $ (7) $ (46) $ 37 Significant components of our deferred tax assets and liabilities were as follows: Years Ended December 31, December 31, 2019 (as revised) Deferred income tax assets: Investment in partnerships $ — $ 54 Net operating losses and other carryforwards 41 38 Share-based compensation 6 7 Lease asset 20 6 Other assets 17 6 Total deferred income tax assets 84 111 Valuation allowance for deferred tax assets (11) (10) Net deferred income tax assets 73 101 Deferred income tax liabilities: Intangibles amortization (74) (125) Other liabilities (18) (6) Total deferred income tax liabilities (92) (131) Net deferred income tax assets (liabilities) $ (19) $ (30) The deferred income tax assets (liabilities) are classified in the consolidated balance sheets as follows: December 31, December 31, 2019 (as revised) Non-current deferred income tax assets, net (a) $ 9 $ 18 Non-current deferred income tax liabilities, net (28) (48) Non-current deferred income tax assets (liabilities) $ (19) $ (30) (a) Included in Investments and other Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The assessment of the amount of value assigned to the deferred tax assets under the applicable accounting rules is judgmental. We are required to consider all available positive and negative evidence in evaluating the likelihood that we will be able to realize the benefit of our deferred tax assets in the future. Such evidence includes scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and the results of recent operations. Since this evaluation requires consideration of events that may occur some years into the future, there is an element of judgment involved. Realization of our deferred tax assets is dependent on generating sufficient taxable income in future periods. The valuation allowance was $11 million as of December 31, 2020 and $10 million as of December 31, 2019. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some or all the deferred tax assets will be realized. The ultimate realization of deferred taxes assets is dependent upon generation of future taxable income during the period in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and taxable income in carryback years and tax-planning strategies when making this assessment. The change in valuation allowance for the year ended December 31, 2020 was $1 million and was attributable primarily to an increase related to the uncertainty regarding the realization of future tax benefit in certain foreign jurisdictions and a decrease of a portion of the valuation allowance recorded against U.S. deferred tax assets. During the fourth quarter of 2020, in conjunction with our efforts to remediate our income tax material weakness in accounting for income taxes, management identified an error in the calculation of the deferred tax asset related to investments in partnerships. Specifically, as of December 30, 2017 our deferred tax asset was overstated by $42 million. In addition, as a result of the overstatement of this deferred tax asset, our valuation allowance established during the year ended December 31, 2019 was overstated. The errors were not material to any individual prior year; however, the correction of these errors would have been material to the 2020 financial statements. We have revised ending net Former Parent investment and deferred taxes as of December 30, 2017, and have revised our financial statements as of and for the years ended December 29, 2018 and December 31, 2019 from the amounts previously reported. As of December 31, 2018 Previously Reported Revision As Revised Net Parent investment $ 1,576 $ (42) $ 1,534 Total shareholders’ equity 1,494 (42) 1,452 As of December 31, 2019 Consolidated Balance Sheet Previously Reported Revision As Revised Non-current deferred income tax assets, net (a) $ 20 $ (2) $ 18 Total assets 3,361 (2) 3,359 Deferred income taxes 47 1 48 Total liabilities 2,095 1 2,096 Additional paid in capital 2,381 (42) 2,339 Accumulated deficit (1,040) 39 (1,001) Total shareholders’ equity 1,256 (3) 1,253 Total liabilities, redeemable non-controlling interests, and shareholders’ equity $ 3,361 $ (2) $ 3,359 (a) Included in Investments and other Year Ended December 31, 2019 Consolidated Statement of Operations Previously Reported Revision As Revised Income tax benefit (expense) $ 7 $ 39 $ 46 Net income (loss) (1,022) 39 (983) Net income (loss) attributable to Covetrus $ (1,019) $ 39 $ (980) Earnings (Loss) per share attributable to Covetrus: Basic $ (9.50) $ 0.36 $ (9.14) Diluted $ (9.50) $ 0.36 $ (9.14) At December 31, 2020, we had the following tax loss and tax credit carryforwards available to offset taxable income in prior and future years: Amount Expiration Period U.S. federal tax loss carryforwards $ 20 2030 - unlimited U.S. federal and state interest carryforwards 8 unlimited U.S. federal other credit carryforwards 2 2030-2040 U.S. state tax loss carryforwards 4 2021 - unlimited Non-U.S. tax loss carryforwards 7 2021 - unlimited Total tax loss and tax credit carryforwards $ 41 The U.S. state tax loss carryforwards were incurred in various jurisdictions. The non-U.S. tax loss carryforwards were incurred in various jurisdictions, predominantly in France, Germany, Poland and Sweden. The tax provision (benefit) differs from the amount computed by applying the federal statutory income tax rate due to the following: Years Ended December 31, December 31, December 29, Income tax provision at federal statutory rate 21.0 % 21 % 21.0 % Transition tax on deemed repatriation of foreign earnings — — 2.8 Pass through non-controlling interest — — (2.1) State income tax provision, net of federal income tax effect (3.7) 0.9 1.4 Foreign income tax (benefit) provision 15.7 0.3 1.4 Tax on GILTI (42.6) (0.9) 1.4 Excess tax benefits related to share-based compensation (28.4) (0.5) (0.7) Revaluation of deferred tax assets and liabilities — (0.9) — Valuation allowance impacts (2.2) (0.5) — Goodwill impairment — (14.4) — Non-deductible expenses (29.3) (0.6) — Reverse Book Gain/(Loss) on Foreign Sales 69.2 0.3 — Return to Provision 12.1 — — Impact of Partnership Inside/Outside Basis Conversion 7.5 — — Impact of Uncertain Tax Positions 2.2 0.1 — Credits 6.6 — — Other 0.8 (0.3) 0.7 Effective tax rate 28.9 % 4.5 % 25.9 % We file U.S. federal and various state and local income tax returns as well as income tax returns in 25 foreign jurisdictions. Tax returns are generally subject to examination for a period of three to five years after the filing of the respective return. The tax years subject to examination by major tax jurisdictions include the years 2017 and forward by the U.S. Internal Revenue Service, the years 2016 and forward for certain state and local jurisdictions, and the years 2011 and forward for certain foreign jurisdictions. The U.S. Tax Cuts and Jobs Act of 2017 (“Tax Act”) is comprehensive tax legislation that implemented complex changes to the U.S. tax code and also moved from a global tax regime to a modified territorial regime which required U.S. companies to pay a mandatory one-time transition tax on historical offshore earnings that have not been repatriated to the U.S., provisions for Global Intangible Low-Taxed Income (“GILTI”), a beneficial tax rate on Foreign-derived intangible income (“FDII”), Base Erosion & Anti-Abuse Tax (“BEAT”) that imposes tax on certain foreign related-party payments, and interest limitation. We became subject to the GILTI, FDII, BEAT and interest limitation provisions effective January 1, 2018. We elected to recognize the tax on GILTI as a period expense in the period the tax is incurred and estimated the impact of each provision of the Tax Act on the effective tax and recorded tax expense for the GILTI provision of $10 million and an interest limitation of $2 million for the year ended December 31, 2020. We recorded a tax expense for the GILTI provision of $10 million for the year ended December 31, 2019. We have concluded that the BEAT and FDII provisions of the Tax Act will not apply to or will not have a material impact on our consolidated and combined financial statements, therefore, we have not recorded an estimate for these items in the effective tax rate for the years ended December 31, 2020 and 2019. For the year ended December 29, 2018, we recorded $4 million additional expense for the one-time transition tax. The change was a result of additional analysis, changes in interpretation and assumptions, as well as additional regulatory guidance that was issued. As of December 29, 2018, we completed our analysis of the impact of the Tax Act in accordance with SAB 118 and the amounts are final. Due to the one-time transition tax and the imposition of the GILTI provisions, all previously unremitted earnings will no longer be subject to U.S. federal income tax, however, there could be U.S. state and foreign withholding taxes upon distribution of such unremitted earnings. We previously considered the earnings in all of our foreign subsidiaries as indefinitely reinvested. Accordingly, we had not recorded deferred income taxes with respect to such earnings. However, in consideration of recent changes in our business and emerging funding needs, we determined effective as of the fourth quarter ending December 31, 2020 that certain unremitted earnings of approximately $135 million existing in the Company’s foreign subsidiaries located in various jurisdictions are no longer indefinitely reinvested. As a result of the U.S. Tax Act, unremitted earnings can generally be remitted to the U.S. without incurring additional U.S. federal income taxation. In addition, earnings repatriated from the jurisdictions noted above, based upon our current legal structure, can generally be repatriated without incurring any withholding tax liability. Accordingly, we determined that the deferred tax liability associated with the repatriation of the undistributed earnings from the applicable subsidiaries located in these tax jurisdictions would be $2 million. ASC Topic 740 prescribes the accounting for uncertainty in income taxes recognized in the financial statements in accordance with other provisions contained within the guidance. This topic prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by the taxing authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate audit settlement. In the normal course of business, our tax returns are subject to examination by various taxing authorities. Such examinations may result in future tax and interest assessments by these taxing authorities for uncertain tax positions taken in respect to certain tax matters. The following table provides a reconciliation of unrecognized tax benefits which are included in Other liabilities within the balance sheets: Years Ended December 31, December 31, December 29, Balance at beginning of period $ 4 $ 6 $ 8 Additions based on prior year tax positions (1) — 2 Reductions from lapse in statutes of limitations — (2) (4) Balance at end of period $ 3 $ 4 $ 6 The amount of unrecognized tax benefits that would affect the effective tax rate if recognized during the year ended December 31, 2020 would be $3 million. We believe that it is reasonably possible that a decrease of up to $0.3 million in unrecognized tax benefits related to foreign tax exposures may be necessary in the coming year due to lapses of statute of limitations. We recognize interest and penalties related to unrecognized tax benefits as components of Income tax (benefit) expense in the statements of operations and accrued $0.1 million in 2020 and $2 million in 2019. |
Earnings (Loss) Per Share
Earnings (Loss) Per Share | 12 Months Ended |
Dec. 31, 2020 | |
Earnings Per Share [Abstract] | |
Earnings (Loss) Per Share | EARNINGS (LOSS) PER SHAREBasic earnings per common share (“EPS”) is computed by dividing net income (loss) available to common shareholders by the weighted-average number of shares of common stock outstanding during the period. In addition, the shares of common stock issuable pursuant to restricted stock awards, restricted stock units, performance stock units, and stock options outstanding under our 2019 Omnibus Incentive Compensation Plan, and shares issuable under our Employee Stock Purchase Plan are included in the diluted EPS calculation to the extent they are dilutive. On February 7, 2019, Henry Schein distributed approximately 71 million shares of Covetrus common stock to its shareholders. The computation of EPS for periods prior to the Separation was performed using the shares distributed by Henry Schein on February 7, 2019. The weighted-average number of shares outstanding for diluted EPS for the periods prior to the Separation also includes approximately 1 million of diluted common share equivalents for restricted stock and restricted stock units as these share-based awards were previously issued by Henry Schein, outstanding at the time of the Separation, and were assumed by Covetrus following the Separation. During 2020, we issued 7.50% Series A Preferred Stock and subsequently converted them to common shares. See Note 14 - Redeemable Convertible Preferred Stock . Following the conversion, the additional shares were included in weighted-average common shares outstanding. The following is a reconciliation of the numerator and denominator of the basic and diluted EPS computation for net (loss) earnings per share: December 31, December 31, 2019 (b) December 29, Numerator: Net income (loss) attributable to Covetrus $ (19) $ (980) $ 101 Adjustment for: Dividends declared on Series A preferred stock (7) — — Income (loss) available to common shareholders $ (26) $ (980) $ 101 Denominator: Basic Weighted-average common shares outstanding 118 107 71 Diluted Effect of dilutive shares — — 1 Diluted shares 118 107 72 Earnings (loss) per share attributable to Covetrus: Basic $ (0.22) $ (9.14) $ 1.41 Diluted $ (0.22) $ (9.14) $ 1.40 Potentially dilutive securities (a) 6 6 — (a) Potentially dilutive securities attributable to outstanding stock options, restricted stock units, restricted stock awards, and performance stock units were excluded from the computation of diluted earnings per share because the securities would have had an antidilutive effect (b) See Note 16 - Income Taxes for discussion related to revisions to Net income (loss) attributable to Covetrus and Earnings (loss) per share |
Share-based Compensation and Ot
Share-based Compensation and Other Employee Benefits | 12 Months Ended |
Dec. 31, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Share-based Compensation and Other Employee Benefits | SHARE-BASED COMPENSATION AND OTHER EMPLOYEE BENEFITS Share-based Compensation Plan In connection with the Separation, Distribution, and Acquisition, all outstanding restricted stock awards (“RSAs”), restricted stock units (“RSUs”), and stock options of Henry Schein and Vets First Choice were exchanged for economically equivalent awards of Covetrus. RSAs and RSUs totaling 327,447 and stock options of 3,914,694 were issued in connection with the exchange. On February 7, 2019, we adopted the 2019 Omnibus Incentive Compensation Plan (the “Plan”) which authorizes our Compensation Committee of the Board of Directors to grant stock options, stock awards, stock units, stock appreciation rights, other share-based awards, and cash awards. Awards may be granted to employees, consultants, advisors, and non-employee directors of Covetrus and our subsidiaries. Awards issued under the Plan may not have a term greater than 10 years from the date of grant and generally vest ratably over a three-year period. During 2020, we granted performance stock units (“PSUs”) subject to specific performance conditions to senior management members that have one year performance cycles over a three-year term, vesting ratably. We also granted PSUs to certain employees who bear responsibility for strategic initiatives we believe are necessary for our transformation that contained a one-year performance cycle and vesting. We reserved 16 million shares of our common stock for issuance under the Plan. In addition, to the extent that awards outstanding under the Plan are cancelled, forfeited, or otherwise terminated without being exercised, the number of shares underlying such awards will be available for future grant under the Plan. We recognized pre-tax share-based compensation expense of $40 million ($32 million after-tax) in 2020, $46 million ($40 million after-tax) in 2019, and $7 million ($6 million after-tax) in 2018. Stock Options We grant stock options at an exercise price equal to the closing market price of our stock on the grant date. We use the Black-Scholes pricing model to determine the fair value of options granted and have elected the accrual method for recognizing compensation costs. The fair value of share-based payment awards calculated using the Black-Scholes model varies based on share price, award exercise price, stock volatility, expected term, risk free interest rate, expected dividends, and the assumptions used in determining these variables. No stock options were granted during 2020 and 2018. The following table summarizes our stock option activity under the Plan for the year ended December 31, 2020: (In millions, except per share amounts) Number Weighted- Weighted- Aggregate Outstanding at beginning of year 4 $ 15.29 Granted — — Exercised (1) 6.80 Forfeited (1) 28.59 Outstanding at end of year 2 $ 15.58 6.9 $ 31 Exercisable at end of year 1 $ 11.99 6.6 $ 24 The following table provides the weighted-average grant-date fair value and related valuation assumptions for these awards granted during the year ended December 31, 2019: Weighted-average grant-date fair value $12.19 Valuation assumption ranges: Expected term (years) 6.0 Risk-free interest rate 1.8 % - 2.5% Expected volatility 29.6 % - 30.0% Cash received from option exercises for the years ended December 31, 2020 and 2019 was $7 million and $4 million, respectively. RSAs/RSUs/PSUs The following table summarizes our RSA/RSU activity under the Plan for the year ended December 31, 2020: Number of Shares Weighted-average Weighted-average Aggregate Nonvested at beginning of year 2 $ 25.69 Granted 3 11.51 Vested (1) 28.24 Forfeited — 19.37 Nonvested at end of year 4 $ 14.07 1.25 $ 124 The weighted-average grant-date fair values for these awards granted: Years Ended 2020 2019 2018 Weighted-average grant-date fair value $ 11.51 $ 27.83 $ 65.26 Additional Information As of December 31, 2020, there was $50 million in unrecognized compensation expense related to nonvested share-based awards that is expected to be recognized over a weighted-average period of 1.8 years. The following table provides further information related to our share-based awards: Years Ended 2020 2019 2018 Intrinsic value of stock options exercised $ 13 $ 15 $ — Fair value of RSA/RSU shares vested $ 6 $ 3 $ 2 Employee Stock Purchase Plan On February 7, 2019, we adopted the Employee Stock Purchase Plan (the “ESPP”) and approved 2 million shares for issuance under this plan. The ESPP is administered by the compensation committee. The ESPP provides for the issuance of shares of our common stock to participating employees. At the end of each designated offering period, which occurs every six months on May 31 and November 30, employees can elect to purchase shares of our common stock with contributions of up to 15% of their base pay, accumulated via payroll deductions, at an amount equal to 85% of the lower of our stock price on (i) the first day of the offering period, or (ii) the last day of the offering period. For the years ended December 31, 2020 and December 31, 2019, activity under the ESPP was not material. Annual Incentive Plan Our compensation committee adopted the Annual Incentive Plan (the “AIP”) on February 7, 2019. The AIP provides pay for performance incentive compensation to our employees, including our named executive officers, rewarding them for their contributions to us with incentive compensation based on attainment of predetermined corporate performance goals, as applicable. We recorded compensation expense associated with the AIP for the year ended December 31, 2020 of $16 million and $7 million for the year ended December 31, 2019. 401(k) Plan Covetrus maintains a qualified 401(k) plan covering eligible employees of certain of the U.S. entities as well as certain other defined contribution plans. Matching contributions and administrative expenses related to these plans were $11 million in 2020, $9 million in 2019, and $6 million in 2018. |
Related-party Transactions
Related-party Transactions | 12 Months Ended |
Dec. 31, 2020 | |
Related Party Transactions [Abstract] | |
Related-party Transactions | RELATED-PARTY TRANSACTIONS Upon closing the transaction with Distrivet, S.A. on April 30, 2020 (see Note 4 - Divestitures and Equity Method Investments ), Distrivet, our equity method investee, became a related party. During the year ended December 31, 2020, we provided management services and corporate branding to Distrivet under our agreement, and we provided goods to Distrivet. These services and product sales were not material during this period. As of December 31, 2020, CD&R beneficially owns 24.80% of our outstanding common stock and are deemed a related party. As part of the terms of the Investment Agreement, CD&R had the right to designate two members to our Board of Directors, which resulted in increasing the number of directors serving on the board from nine to ten directors. CD&R's current designees on our Board of Directors are Ravi Sachdev (investor board member) and Sandra E. Peterson (advisor board member). CD&R’s right to representation on our board is directly related to their level of share ownership. Should CD&R's beneficial ownership decrease below 50% of its ownership as of May 19, 2020, or below approximately 16.8 million shares, then its right to designate an advisor board member terminates. Should CD&R's beneficial ownership decrease below 25% of its ownership as of May 19, 2020, or below approximately 8.4 million shares, then its right to designate an investor board member is also terminated. See Note 14 - Redeemable Convertible Preferred Stock . Allocation of General Corporate Expenses As discussed in Note 1 - Business Overview and Significant Accounting Policies, we exited all of our transition service agreements. We incurred allocated general corporate expenses of $5 million in 2019 and $55 million in 2018 which are included within Selling, general and administrative in the consolidated and combined statements of operations. |
Segment Data
Segment Data | 12 Months Ended |
Dec. 31, 2020 | |
Segment Reporting [Abstract] | |
Segment Data | SEGMENT DATA In connection with the Separation, Distribution, and Acquisition, we revised our reportable segments to reflect how the chief operating decision maker (the chief executive officer) (the “CODM”) reviews financial information and makes operating decisions. This resulted in a change in the operating segments from (i) supply chain and (ii) technology and value-added services to (i) North America, (ii) Europe, and (iii) APAC & Emerging Markets. While the historical business was focused on driving growth through specific product and service offerings to its customers, the Separation, Distribution, and Acquisition allowed for the integration of the different products and service offerings, along with prescription management, data analytics, and insights through veterinary practice management software into one multi-channel veterinary platform. We will focus on delivering the integrated platform of products and services to our customers on a geographical basis. During the second quarter of 2019, our CODM began evaluating segment profit (loss) solely based on Adjusted EBITDA. In the prior period, our CODM was using both operating income and Adjusted EBITDA for measurement purposes, thus operating income was presented as it most closely reflected the measurement principle applied to our consolidated and combined financial statements. We do not allocate expenses managed at the corporate level to our segments, such as corporate wages and related benefits, corporate occupancy costs, professional services utilized at the corporate level, and non-recurring expenses. All intersegment balances and transactions have been eliminated in consolidation. The following tables reflect our segment information and Corporate, the segment recast for the prior years, and reconciles Adjusted EBITDA for reportable segments to consolidated net income (loss) attributable to Covetrus: At and For the Year Ended December 31, 2020 North America Europe APAC & Emerging Markets Corporate Eliminations Total Net sales $ 2,377 $ 1,571 $ 402 $ — $ (11) $ 4,339 Adjusted EBITDA $ 187 $ 72 $ 28 $ (61) $ — $ 226 Depreciation and amortization $ 144 $ 17 $ 5 $ — $ — $ 166 Income tax benefit (expense) $ 19 $ (11) $ (6) $ 5 $ — $ 7 Total assets $ 3,077 $ 713 $ 188 $ 1,415 $ (1,897) $ 3,496 Expenditures for long-lived assets $ 41 $ 11 $ 3 $ 3 $ — $ 58 Reconciliation of Net Income (Loss) Attributable to Covetrus to Adjusted EBITDA: Net income (loss) attributable to Covetrus $ (19) Plus: Depreciation and amortization 166 Plus: Interest expense, net 47 Less: Income tax (benefit) expense (7) Earnings (loss) before interest, taxes, depreciation, and amortization 187 Plus: Share-based compensation 40 Plus: Strategic consulting 20 Plus: Transaction costs (a) 8 Plus: Separation programs and executive severance 11 Plus: IT infrastructure 4 Plus: Formation of Covetrus (b) 19 Plus: Capital structure 2 Plus: Equity method investments and non-consolidated affiliates (c) 2 Plus: Operating lease right-of-use asset impairment 8 Plus: France managed exit (d) 7 Less: Other items, net (e) (82) Adjusted EBITDA 226 (a) Includes legal, accounting, tax, and other professional fees incurred in connection with acquisitions and divestitures (b) Includes professional and consulting fees, duplicative costs associated with transition service agreements, and other costs incurred in connection with the separation from Former Parent and establishing Covetrus as an independent public company (c) Includes the proportionate share of the adjustments to EBITDA of consolidated and non-consolidated affiliates where Covetrus ownership is less than 100% (d) Includes $6 million of severance and $1 million of other costs. See Note 4 - Divestitures and Equity Method Investments for further discussion (e) Includes a pre-tax gain of $73 million from the sale of scil, a $6 million mark-to-market adjustment for our Distrivet options, and a $1 million gain on the deconsolidation of SAHS. See Note 4 - Divestitures and Equity Method Investments At and For the Year Ended December 31, 2019 North America Europe APAC & Emerging Markets Corporate Eliminations Total Net sales $ 2,111 $ 1,509 $ 368 $ — $ (12) $ 3,976 Adjusted EBITDA $ 153 $ 68 $ 18 $ (39) $ — $ 200 Depreciation and amortization $ 131 $ 18 $ 6 $ — $ — $ 155 Income tax benefit (expense) $ 47 $ (3) $ (4) $ 6 $ — $ 46 Total assets $ 2,939 $ 726 $ 137 $ 783 $ (1,226) $ 3,359 Expenditures for long-lived assets $ 23 $ 10 $ 1 $ 5 $ — $ 39 Reconciliation of Net Income (Loss) Attributable to Covetrus to Adjusted EBITDA: Net income (loss) attributable to Covetrus $ (980) Plus: Depreciation and amortization 155 Plus: Interest expense, net 53 Less: Income tax (benefit) expense (46) Earnings (loss) before interest, taxes, depreciation, and amortization (818) Plus: Share-based compensation 46 Plus: Strategic consulting 2 Plus: Transaction costs (a) 2 Plus: Formation of Covetrus (b) 31 Plus: Separation programs and executive severance 11 Plus: Carve-out operating expenses 5 Plus: IT infrastructure 6 Plus: Goodwill impairment 938 Less: Equity method investments and non-consolidated affiliates (c) (4) Less: Other items, net (d) (19) Adjusted EBITDA $ 200 (a) Includes legal, accounting, tax, and other professional fees incurred in connection with acquisitions and divestitures (b)Includes professional and consulting fees, duplicative costs associated with transition service agreements, and other costs incurred in connection with the separation from Former Parent and establishing Covetrus as an independent public company (c) Includes the proportionate share of the adjustments to EBITDA of consolidated and non-consolidated affiliates where Covetrus ownership is less than 100% (d) Includes $15 million of gains associated with acquisitions in France and Romania, $2 million gain on legacy investment, and $1 million government grant income At and For the Year Ended December 29, 2018 North America Europe APAC & Emerging Markets Corporate Eliminations Total Net sales $ 1,939 $ 1,463 $ 387 $ — $ (11) $ 3,778 Adjusted EBITDA $ 157 $ 75 $ 19 $ (32) $ — $ 219 Depreciation and amortization $ 41 $ 17 $ 6 $ — $ — $ 64 Income tax expense $ (18) $ (15) $ (3) $ (1) $ — $ (37) Total assets $ 1,302 $ 702 $ 182 $ 10 $ (4) $ 2,192 Expenditures for long-lived assets $ 14 $ 7 $ 1 $ — $ — $ 22 Reconciliation of Net Income (Loss) Attributable to Covetrus to Adjusted EBITDA: Net income (loss) attributable to Covetrus $ 101 Plus: Depreciation and amortization 64 Plus: Interest expense, net 2 Plus: Income tax (benefit) expense 37 Earnings (loss) before interest, taxes, depreciation, and amortization 204 Plus: Share-based compensation 7 Plus: Separation programs and executive severance 9 Less: Equity method investments and non-consolidated affiliates (1) Adjusted EBITDA $ 219 See Note 5 - Revenue from Contracts with Customers |
Summary of Quarterly Data (Unau
Summary of Quarterly Data (Unaudited) | 12 Months Ended |
Dec. 31, 2020 | |
Quarterly Financial Information Disclosure [Abstract] | |
Summary of Quarterly Data (Unaudited) | A summary of quarterly data follows: For the Three Months Ended December 31, September 30, June 30, March 31, Net sales $ 1,121 $ 1,126 $ 1,026 $ 1,065 Gross profit $ 206 $ 197 $ 192 $ 202 Goodwill impairment $ — $ — $ — $ — Operating income (loss) $ (19) $ (27) $ (4) $ (20) Net income (loss) attributable to Covetrus $ (4) $ (35) $ 54 $ (33) Earnings (loss) per share: Basic $ (0.04) $ (0.33) $ 0.40 $ (0.30) Diluted $ (0.04) $ (0.33) $ 0.40 $ (0.30) For the Three Months Ended December 31, September 30, June 30, March 31, Net sales $ 1,008 $ 1,018 $ 1,009 $ 941 Gross profit (a) $ 188 $ 191 $ 193 $ 177 Goodwill impairment $ (1) $ 939 $ — $ — Operating income (loss) $ (25) $ (958) $ (5) $ (9) Net income (loss) attributable to Covetrus (b) $ (37) $ (920) $ (10) $ (13) Earnings (Loss) per share: (b) Basic $ (0.33) $ (8.22) $ (0.09) $ (0.14) Diluted $ (0.33) $ (8.22) $ (0.09) $ (0.14) (a) 2019 quarterly data reflects a reclassification of Vets First Choice shipping expenses that were previously included in Selling, general and administrative into Cost of sales to classify these Vets First Choice shipping expenses consistently with the rest of our business (b) The third quarter ended September 30, 2019 includes a revision (see Note 16 - Income Taxes) |
Business Overview and Signifi_2
Business Overview and Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2020 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation and Principles of Consolidation We prepared the accompanying consolidated and combined financial statements in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). |
Principles of Consolidation | Except as otherwise specifically noted, the combined financial statements and other financial information for the fiscal year ended December 29, 2018 relate to the Animal Health Business, as this period predates the February 7, 2019 effective date of the Acquisition. This Form 10-K does not include the historical financial results of Vets First Choice for the fiscal year ended December 29, 2018 and does not include any pro forma financial statements of Covetrus. Beginning with the Quarterly Report on Form 10-Q for the quarter ended March 31, 2019, Covetrus began reporting on a consolidated basis, representing the combined operations of the Animal Health Business and Vets First Choice and their respective subsidiaries. The Animal Health Business is deemed the acquirer in this combination for accounting purposes under GAAP, therefore, the Animal Health Business is considered Covetrus’ predecessor and the historical combined financial statements of the Animal Health Business prior to February 7, 2019 are reflected in Covetrus’ quarterly and annual reports as Covetrus’ historical financial statements. The accompanying consolidated and combined 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. All significant intercompany transactions and balances are eliminated in consolidation. All intracompany transactions have been eliminated and all intercompany transactions between the Animal Health Business and Henry Schein have been eliminated in the combined financial statements as such transactions were deemed to not have occurred between us and Henry Schein. 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. The combined financial statements include expense allocations for (i) certain corporate functions historically provided by Henry Schein, including accounting, legal, information services, planning, compliance, investor relations, administration and communication, and similar costs, (ii) employee benefits and incentives, and (iii) share-based compensation. These expenses have been allocated to the Animal Health Business based on direct usage when identifiable, with the remainder allocated on a pro rata basis of net sales, headcount, or other measures of the Animal Health Business and Henry Schein. The Animal Health Business believes the bases on which the expenses have been allocated are a reasonable reflection of the utilization of services provided to, or the benefit received by, the Animal Health Business during the periods presented. The allocations may not, however, reflect the actual expenses that the Animal Health Business would have incurred as a standalone company for the periods presented. Actual costs that may have been incurred if the Animal Health Business had been a standalone company would depend on a number of |
Use of Estimates | Use of Estimates Preparing financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements and accompanying notes. Changes in circumstances could cause actual results to differ materially from these estimates. The most significant estimates include our evaluation of goodwill impairment, deferred taxes, contingencies, intangible assets acquired, fair value measurements, share-based compensation, self-insurance reserves, and supplier rebates. |
Fiscal Year | Fiscal Year During fiscal year 2018, we operated on a 52-53-week basis ending on the last Saturday of December. For fiscal year 2019, we adopted a last day of the calendar year accounting and operating cycle. We made this change on a prospective basis and did not adjust operating results for periods prior to 2019 as the results were not material. Unless otherwise indicated, year-end 2020, 2019, and 2018 refer to our fiscal years ended December 31, 2020, December 31, 2019, and December 29, 2018, respectively. |
Revenue Recognition & Supplier Rebates | Revenue Recognition We recognize revenue when a customer obtains control of promised goods or services in an amount that reflects the consideration that we expect to receive for those goods or services. To recognize revenue, we do the following: • Identify the contract(s) with a customer • Identify the performance obligations in the contract • Determine the transaction price • Allocate the transaction price to the performance obligations in the contract • Recognize revenue when, or as, the entity satisfies a performance obligation Our revenue is generated from the following major product categories: • Supply Chain Services - primarily includes the sale of animal-health consumable products, including our own proprietary and Covetrus-branded products, small equipment, laboratory products, large equipment, equipment repair services, branded and generic pharmaceuticals, vaccines, surgical products, diagnostic tests, infection-control products, parasiticides, and vitamins and supplements to wholesale and retail customers. Our value-added practice solutions include equipment repair, inventory management, e-commerce, as well as continuing education services for practitioners. • Software Services - includes practice management software systems for veterinary practitioners and animal-health clinics, client communication services, reminders, data backup services, and hardware sales and support. • Prescription Management - includes the distribution of finished goods pharmacy products, specialty pharmaceutical compounding, e-commerce, shipping, manufacturer incentives, service fees, and data integration and support services. We estimate the transaction price at contract inception, including any variable consideration, and update the estimate each reporting period for any changes in circumstances. Variable consideration, including provisions for discounts, rebates to customers, customer returns, and other contra revenue adjustments is included in the transaction price at contract inception by estimating the most likely amount based upon historical data and estimates and are provided for in the period in which the related sales are recognized. Many of our contracts with customers require us to take possession of the inventory, provide the goods or services, and establish the price for the goods or services. Revenue and cost of sales from this type of contract are recognized on a gross basis. From time to time, certain contracts require us to arrange for the procurement of goods or services on behalf of our customer, but we do not purchase or take title of the product from the supplier before they are transferred to our customer. In this type of contract, we are acting as an agent, and revenue is recognized on a net basis (revenue less cost of sales is included in Net sales) (“Net Agency Revenue”), as the supplier is the primary obligor, bears the inventory and credit risk, establishes the price, determines the product specifications, and the amount is fixed. Payment terms differ by customer and jurisdiction and generally range from 30 to 60 days. Supply Chain Services Revenue derived from the sale of consumable products is recognized at a point in time when control transfers to the customer. Such sales typically entail high-volume, low-dollar orders shipped using third-party common carriers. We believe that the shipment date is the most appropriate point in time indicating control has transferred to the customer, because we have no post-shipment obligations, and this is when legal title and risks and rewards of ownership transfer to the customer, and we have an enforceable right to payment. Revenue derived from the sale of equipment is recognized when control transfers to the customer. This generally occurs when the equipment is delivered. Such sales typically entail scheduled deliveries of large equipment primarily by equipment service technicians. Some equipment sales require minimal installation which is typically completed at the time of delivery. Our products generally carry standard warranty terms provided by the manufacturer, however, in instances where we provide warranty labor services, the warranty costs are accrued in the period the related revenue is recognized. Software Services Revenue derived from the sale of software products is recognized when products are shipped to customers or made available electronically. Such software is generally installed by customers and does not require extensive training due to the nature of its design. Revenue derived from post-contract customer support for software, including annual support, is generally recognized over the life of the support period while revenue from training services is recognized over the period the services are provided. Prescription Management Revenue under this category is primarily generated from two sources: (i) prescription management and pharmacy services (including the distribution of finished goods products, specialty pharmaceutical compounding, shipping, manufacturer incentives, and service fees), which is recognized when control transfers to the customer, typically upon shipment or delivery, and (ii) data integration and support services (including software as a service, initial setup to connect customers to hosted software applications, data conversions, custom software developments, upgrades and enhancements, training, software configuration, and technical support), which is recognized over the period the services are provided. Other Revenue Revenue derived from other sources, including freight charges and equipment repairs, is recognized when the related product revenue is recognized or when the services are provided. We applied the practical expedient to treat shipping and handling activities performed after the customer obtains control as fulfillment activities, rather than a separate performance obligation in the contract. Certain of our revenue is derived from bundled arrangements that include multiple distinct performance obligations that are accounted for separately. When we sell software products together with related services (e.g., training and technical support), we allocate revenue to software using the residual method, utilizing an estimate of our standalone selling price to estimate the fair value of the undelivered elements. Bundled arrangements that include elements that are not considered software consist primarily of equipment and the related installation service. We allocate revenue for such arrangements based on the relative selling prices of the goods or services. If an observable selling price is not available because we do not sell the goods or services separately, we use one of the following techniques to estimate the standalone selling price: (i) adjusted market approach, (ii) cost-plus approach, or (iii) the residual method. There is no specific hierarchy for the use of these methods, but the relative selling price reflects our best estimate of what the selling prices of each deliverable would be if it were sold regularly on a standalone basis, taking into consideration the cost structure of the business, technical skill required, customer location, and other market conditions. Sales, value-add, and other taxes we collect concurrently with revenue-producing activities are excluded from revenue, and are recorded as liabilities and included in Accrued taxes. See Note 5 - Revenue from Contracts with Customers and Note 20 - Segment Data for additional disclosures. Contract Balances Contract balances represent amounts presented in the consolidated balance sheets when we have either transferred goods or services to the customer or the customer has paid consideration to us under the contract. These contract balances include accounts receivable, contract assets, and contract liabilities. Accounts Receivable The carrying amount of Accounts receivable is reduced by an allowance that reflects our best estimate of the amounts that are not expected to be collected. We estimate and reserve for our expected credit loss exposure based on our experience with past due accounts, write-off history, the aging of accounts receivable, our analysis of customer data, current economic conditions, and reasonable and supportable future forecasts. From time to time, we adjust our assumptions for anticipated changes in any of these or other factors expected to affect collectability. Accounts receivable balances are written off when it is probable that all contractual payments due will not be collected. Contract Assets Contract assets include amounts related to any conditional right to consideration for work completed as of the reporting date and generally represent amounts owed to us by customers, but not yet billed. Contract assets are transferred to accounts receivable when the right becomes unconditional. Current contract assets are included in Prepaid expenses and other and non-current contract assets are included in Investments and other within the consolidated balance sheets. The contract assets primarily relate to the bundled arrangements for the sale of equipment and consumables and sales of term software licenses. Contract Liabilities Contract liabilities are comprised of advance payments and deferred revenue amounts. Contract liabilities are transferred to revenue once the performance obligation has been satisfied. Current contract liabilities are included in Other current liabilities and non-current contract liabilities are included in Other liabilities within the consolidated balance sheets. The contract liabilities primarily relate to advance payments from customers and upfront payments for service arrangements provided over time. Supplier Rebates We receive quarterly and annual performance rebates from suppliers based upon attainment of certain purchase or sales goals. Supplier rebates are included as a reduction of Cost of sales and are recognized over the period they are earned. The factors considered in estimating supplier rebate accruals include forecasted inventory purchases and sales in conjunction with supplier rebate contract terms, which generally provide for increasing rebates based on either increased purchase or sales volume. |
Shipping and Handling Costs and Cost of Sales | Shipping and Handling Costs Freight and other direct shipping costs are included in Cost of sales. Direct handling costs, which represent primarily direct compensation costs of employees who pick, pack, and otherwise prepare, if necessary, merchandise for shipment to customers, are reflected in Selling, general and administrative. Cost of Sales The primary components of Cost of sales include the cost of the product (net of purchase discounts, supplier chargebacks, and rebates) and inbound and outbound freight charges. Our distribution network costs, such as purchasing, receiving, inspections, warehousing, internal inventory transfers, and other related costs are included in Selling, general and administrative along with other operating costs. Cost of sales also includes costs directly related to the design and production of software, distribution of licenses, hardware and costs related to services provided, and amortization of the capitalized costs for internally generated software for resale. |
Cash and Cash Equivalents | Cash and Cash Equivalents We classify all highly liquid short-term instruments with an original maturity of three months or less as cash equivalents. We maintain cash depository accounts with high-quality banks throughout the world. Our cash on deposit in the U.S. may at times exceed federally insured limits. We have not incurred any related losses for the years ended December 31, 2020, December 31, 2019, and December 29, 2018. |
Inventories | Inventories Inventories consist primarily of finished goods and are valued at the lower of cost or net realizable value. When inventory is adjusted to net realizable value, the corresponding adjustment is included in Cost of sales. Cost is determined by the first-in, first-out method for merchandise or actual cost for large equipment and high-tech equipment. In accordance with our policy for inventory valuation, we consider many factors, including the condition and salability of the inventory, historical sales, forecasted sales, and market and economic trends. From time to time, we adjust our assumptions for anticipated changes in any of these or other factors expected to affect the value of inventory. We record a liability for unconditional purchase commitments with contract suppliers for quantities greater than future demand forecasts consistent with excess and obsolete inventory valuations. As of December 31, 2020 and 2019, we did not record any liability related to excess unconditional purchase commitments. We are subject to a concentration of risk with our suppliers, as five suppliers accounted for approximately 50% of our purchases for the years ended December 31, 2020 and 2019. |
Assets and Liabilities Held for Sale | Assets and Liabilities Held for SaleAssets and liabilities are considered held for sale when certain criteria are met, including when management has committed to a plan to sell the asset, the asset is available for sale in its immediate condition, and the sale is probable within one year of the reporting date. Assets and liabilities held for sale are reported at the lower of cost or fair value less costs to sell. |
Advertising | AdvertisingAdvertising costs are charged to operations when incurred as part of Selling, general and administrative. We receive reimbursements from certain vendors for advertising costs. Reimbursements for advertising costs are reported on a net basis within Selling, general and administrative. When reimbursements received are more than the cost of advertising, the net amount is reported within Cost of sales. Advertising expense was $17 million in 2020, $17 million in 2019, and $16 million in 2018. Additionally, advertising and promotional costs incurred in connection with direct marketing, including product catalogs and printed materials, are deferred and amortized on a straight-line basis over the period that is benefited, typically one year. |
Property and Equipment | Property and Equipment Property and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation is computed primarily under the straight-line method. Amortization of leasehold improvements is computed using the straight-line method over the lesser of the useful life of the assets or the lease terms. See Note 6 - Property and Equipment, Net. Capitalized software costs consist of costs to purchase and develop software for internal use. Costs incurred during the application development stage for software bought and further customized by outside suppliers, software developed by a supplier for proprietary use, and costs incurred for our own personnel who are directly associated with software development are capitalized. |
Income Taxes | Income Taxes We account for income taxes under an asset and liability approach that requires the recognition of deferred income tax assets and liabilities for the expected future tax consequences of events that have been recognized in the financial statements or tax returns. In estimating future tax consequences, we generally consider all expected future events other than enactments of changes in tax laws or rates. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized as income or expense in the period of the enactment date. See Note 16 - Income Taxes . Our tax provision for fiscal years 2019 and 2018 were prepared utilizing the separate return methodology as if we had not been included in a consolidated or group income tax return with Henry Schein. Current income tax liabilities are presented based on current amounts owed for the current tax year for entities that file separate returns. Current taxes payable for entities that joined in a consolidated or group filing with Henry Schein were settled in Net Former Parent investment consistent with other intercompany obligations. |
Redeemable Convertible Preferred Stock | Redeemable Convertible Preferred StockWe classified our redeemable convertible preferred stock issued on May 19, 2020 as mezzanine equity on our consolidated balance sheets as the redemption features were outside of our control. We recorded redeemable convertible preferred stock at fair value upon issuance, net of any issuance costs. Our redeemable convertible preferred stock was converted during the year ended December 31, 2020. |
Redeemable Non-controlling Interest | Redeemable Non-Controlling InterestsSome minority equity owners in certain of our subsidiaries have the right, at certain times, to require us to acquire their ownership interest in those entities. As a result of these redemption features, we record the non-controlling interests as redeemable and classify them as mezzanine equity on our consolidated balance sheets initially at their acquisition-date fair value. The non-controlling interests are adjusted each reporting period for income (or loss) attributable to the non-controlling interests. A measurement period adjustment, if any, is then made to adjust the non-controlling interests to the higher of redemption value or carrying value each reporting period. These adjustments are recognized through retained earnings and are not reflected in net income or net income attributable to Covetrus. |
Share-based Compensation | Share-based Compensation Share-based compensation represents the cost related to share-based awards granted to employees and non-employee directors, which are measured at the grant date fair value. We recognize share-based compensation expense, net of estimated expected forfeitures, on a straight-line basis over the requisite service period of the award, which is included in Selling, general and administrative in our consolidated and combined statements of operations. |
Foreign Currency Translation and Transactions | Foreign Currency Translation and Transactions The financial position and results of operations of our foreign subsidiaries are determined using local currency as the functional currency. Assets and liabilities of these subsidiaries are translated at the exchange rate in effect at each year end. Statement of operations accounts are translated at the average rate of exchange prevailing during the year. Translation adjustments arising from the use of differing exchange rates from period to period are included in Accumulated other comprehensive loss in equity. Gains and losses resulting from foreign currency transactions are included in earnings. |
Derivatives and Financial Instruments | Derivatives Our global business exposes us to risks related to changes in foreign currency exchange rates and interest rates. Our financial risk management program is designed to manage the exposure arising from cash flow variability and uses derivative financial instruments to minimize this risk. We do not enter into derivative financial instruments for trading or speculative purposes. |
Business Acquisition | Business AcquisitionsThe net assets of businesses acquired are recorded at their fair value at the acquisition date and the consolidated and combined financial statements include their results of operations from that date. Any excess of acquisition consideration over the fair value of identifiable net assets acquired is recorded as goodwill. The major classes of assets and liabilities that we generally allocate purchase price to, excluding goodwill, include identifiable intangible assets (e.g., trademarks and trade names, customer relationships and lists, and non-compete agreements), accounts receivable, inventory, property and equipment, deferred taxes, and other current and long-term assets and liabilities. The estimated fair value of identifiable intangible assets is based on critical estimates, judgments, and assumptions derived from analysis of market conditions, discount rate, discounted cash flows, customer retention rates, and estimated useful lives. |
Goodwill | Goodwill As noted in Business Acquisitions above, our Goodwill is derived when we acquire another company. Goodwill is not amortized, but the potential impairment of goodwill is assessed at least annually (on October 1st) and on an interim basis whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Impairment analysis for goodwill requires a comparison of the fair value to the carrying value of a reporting unit. Some important factors that could trigger an interim impairment review include: • Significant underperformance relative to expected historical or projected future operating results, • Significant changes in the manner of the use of acquired assets or our overall business strategy (e.g., decision to divest a business), • Sustained decline in our share price and a resulting decrease in our market capitalization, or • Significant negative industry or economic trends. |
Long-lived Assets | Long-lived Assets Long-lived assets, other than goodwill, are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable through the estimated undiscounted future cash flows derived from such assets. |
Leases | Leases We evaluate whether an arrangement is or contains a lease at contract inception. For all our leases, we determine the classification as either operating or financing. Leases with an initial term of 12 months or less are not recognized on the balance sheet. We have lease agreements with both lease and non-lease components, which are generally accounted for together as a single lease component. We recognize lease expense for these leases on a straight-line basis over the lease term. For purposes of calculating operating lease liabilities, lease terms may be deemed to include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. |
Equity Method Investments | Equity Method InvestmentsEquity investments are accounted for using the equity method of accounting if the investment gives us the ability to exercise significant influence, but not control, over an investee. Equity method investments are included within Investments and other on our consolidated balance sheets. Our share of the earnings or losses as reported by equity method investees, amortization of basis differences, related gains or losses, and impairments, if any, are recognized in Equity in earnings of affiliates on our consolidated and combined statements of operations. Each reporting period, we evaluate whether declines in fair value below carrying value are other-than-temporary and if so, we write down the investment to its estimated fair value. |
Loss Contingencies | Loss ContingenciesWe are subject to loss contingencies, including claims with customers and vendors, pending and potential legal actions for damages, investigations relating to governmental laws and regulations, and other matters arising out of the normal course of our business. We record a liability when we believe that it is probable that a loss has been incurred and the amount can be reasonably estimated. If we determine that a loss is reasonably possible and the loss or range of loss can be estimated, we disclose the possible loss in the notes to our financial statements. |
Comprehensive Income | Comprehensive Income Comprehensive income (loss) includes certain gains and losses that, under GAAP, are excluded from net income as such amounts are recorded directly as an adjustment to equity. Comprehensive income (loss) is primarily comprised of net income, foreign currency translation gain (loss), unrealized gain (loss) from hedging activities, and pension adjustment gain (loss). |
Accounting Pronouncements Adopted and to be Adopted | Accounting Pronouncements • As of January 1, 2020, we adopted Accounting Standards Codification Topic 326, Credit Losses (“Topic 326”) which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost, including accounts receivable. Topic 326 is effective for interim and annual reporting periods beginning after December 15, 2019 and is required to be adopted using the modified retrospective basis, with a cumulative-effect adjustment to Retained earnings (Accumulated deficit) as of the beginning of the first reporting period in which the guidance of Topic 326 is effective. The adoption of Topic 326 did not have a material impact on the results of our consolidated financial statements. • Accounting Standards Update (“ASU”) 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes,” removes specific technical exceptions to general principles found in Topic 740, items that often produce information that investors have difficulty understanding and simplifies the accounting for income taxes. The standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. As of January 1, 2021, we adopted this ASU and it is not expected to have a material impact on the results of our consolidated financial statements. |
Fair Value | Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis Assets that are measured at fair value on a nonrecurring basis primarily relate to Property and equipment, net, Operating lease right-of-use assets, net, Goodwill, and Other intangible assets, net. We do not periodically adjust carrying value to fair value for these assets; rather, the carrying value of the asset is reduced to its fair value when we determine that impairment has occurred. At August 31, 2019, assets measured at fair value on a nonrecurring basis consisted of Goodwill. The fair value measurement of goodwill was measured using both the market approach and income approach, which includes discounted expected cash flows. As the discounted cash flows include unobservable inputs that were significant to the fair value measurement, the fair value was classified as a Level 3 measurement within the fair value hierarchy. See Note 8 - Goodwill and Other Intangibles, Net . At September 30, 2020, we recorded an operating lease right-of-use asset impairment of $8 million included in Selling, general and administrative in our consolidated and combined statements of operations in our North American segment as this asset group was not recoverable based on COVID-19's effect on the subleasing market as well as other asset group specific factors. The fair value of the operating lease right-of-use asset was $8 million, determined using the discounted expected cash flow. The significant unobservable inputs utilized in this Level 3 fair value measurement included market rent assumptions and discount rate. Assets and Liabilities that are not Measured at Fair Value Financial Assets and Liabilities The carrying amounts reported on the consolidated balance sheets for Cash and cash equivalents, Accounts receivable, net, Other receivables, Accounts payable, and Accrued expenses approximate their fair value due to the short maturity of those instruments. Long-Term Debt Our Long-term debt is classified as a Level 2 instrument. The carrying amount of the term loan approximates fair value given the underlying interest rate applied to such amounts outstanding is currently reset to the prevailing monthly market rate. See Note 9 - Long-Term Debt and Other Borrowings, Net. |
Business Acquisitions (Tables)
Business Acquisitions (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Business Combinations [Abstract] | |
Schedule of Acquisition Date Fair Value of Consideration Transferred | The acquisition date fair value of the consideration transferred consisted of the following: Estimated Consideration Total Covetrus shares issued to Vets First Choice shareholders 39,041,689 Per share price (in actuals) (a) $ 43.05 Total fair value of shares issued to Vets First Choice shareholders $ 1,681 Fair value of Vets First Choice replacement stock option awards attributable to pre-acquisition service 62 Vets First Choice debt repaid at close 24 Vets First Choice expenses paid at close 18 Less: Vets First Choice cash used to fund transaction (9) Total consideration $ 1,776 (a) Closing price on February 7, 2019, Covetrus shares trading on a when-issued basis (Nasdaq: CVETV) |
Schedule of Purchase Price Allocation | The purchase price was allocated to the underlying assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition. The following table summarizes the allocation of the purchase price to the assets acquired and liabilities assumed: Estimated Fair Value Fair value of net assets acquired $ 14 Goodwill 1,324 Intangible assets 545 Deferred tax liabilities (107) Total acquisition cost $ 1,776 |
Unaudited Pro Forma Financial Information | The following unaudited pro forma financial information presents the results of operations for the years ended December 31, 2019 and December 29, 2018 as if the Acquisition had occurred as of December 31, 2017. The unaudited pro forma results reflect certain adjustments for items that are not expected to have a continuing impact, such as adjustments for transaction costs incurred, management fees, and purchase accounting. The information presented below has been prepared for comparative purposes only and does not purport to be indicative of either future results of operations or the results of operations that would have occurred had the Acquisition been consummated on December 31, 2017: Years Ended December 31, 2019 December 29, 2018 Net sales $ 4,000 $ 3,981 Goodwill impairment $ 938 $ — Net income (loss) $ (983) $ (63) Net income (loss) attributable to Covetrus $ (980) $ (63) |
Revenue from Contracts with C_2
Revenue from Contracts with Customers (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Revenue from Contract with Customer [Abstract] | |
Disaggregation of Revenue | The tables below presents our revenue disaggregated by major product category and reportable segment: Year Ended December 31, 2020 Supply Chain Services Software Services Prescription Management Eliminations Total North America $ 1,969 $ 78 $ 406 $ (76) $ 2,377 Europe 1,574 10 — (13) 1,571 APAC & Emerging Markets 394 8 — — 402 Eliminations (11) — — — (11) Total Net sales $ 3,926 $ 96 $ 406 $ (89) $ 4,339 Year Ended December 31, 2019 Supply Chain Services Software Services Prescription Management Eliminations Total North America $ 1,816 $ 82 $ 246 $ (33) $ 2,111 Europe 1,513 10 — (14) 1,509 APAC & Emerging Markets 361 7 — — 368 Eliminations (12) — — — (12) Total Net sales $ 3,678 $ 99 $ 246 $ (47) $ 3,976 Year Ended December 29, 2018 Supply Chain Services Software Services Prescription Management Eliminations Total North America $ 1,858 $ 83 $ — $ (2) $ 1,939 Europe 1,462 11 — (10) 1,463 APAC & Emerging Markets 380 7 — — 387 Eliminations (11) — — — (11) Total Net sales $ 3,689 $ 101 $ — $ (12) $ 3,778 |
Schedule of Receivables, Contract Assets, and Contract Liabilities | The following table presents information about our receivables and contract liabilities from contracts with customers: Balance Sheet Location December 31, 2020 December 31, 2019 Accounts receivable: Accounts receivable, net Accounts receivable, net $ 507 $ 426 Contract liabilities: Deferred revenue, current Other current liabilities $ 22 $ 37 |
Property and Equipment, Net (Ta
Property and Equipment, Net (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment, Net | Property and equipment, net consisted of the following as of: Estimated Useful Life December 31, December 31, Land N/A $ 1 $ 1 Buildings and permanent improvements 10-40 years 10 9 Leasehold improvements Lesser of the useful life or lease terms 21 20 Machinery and warehouse equipment 2-12 years 45 44 Furniture, fixtures, and other 2-10 years 46 36 Computer equipment and software 2-10 years 76 57 Capital in progress 23 10 Total property and equipment, gross 222 177 Less: accumulated depreciation and amortization (106) (84) Total Property and equipment, net $ 116 $ 93 The following table sets forth our depreciation and amortization expense related to property and equipment: Years Ended Location 2020 2019 2018 Cost of sales $ 1 $ 3 $ 2 Selling, general and administrative 30 25 13 Total depreciation and amortization expense $ 31 $ 28 $ 15 |
Leases (Tables)
Leases (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Leases [Abstract] | |
Supplemental Balance Sheet Information | The following table presents the lease balances within the consolidated balance sheets and other supplemental information related to our leases as of: December 31, 2020 December 31, 2019 Operating Leases: Operating lease right-of-use assets, net $ 117 $ 84 Accrued expenses, other $ 22 $ 19 Other liabilities 107 67 Total operating lease liabilities $ 129 $ 86 Finance Leases: Property and equipment, net $ 1 $ 2 Current maturities of long-term debt and other borrowings $ 1 $ 1 Total finance lease liabilities $ 1 $ 1 Weighted-average remaining lease term: Operating leases 8.1 years 6.8 years Finance leases 2.5 years 2.4 years Weighted-average discount rate: Operating leases 3.5 % 3.5 % Finance leases 3.8 % 8.1 % |
Operating Lease Maturities | The following table presents the maturities of our lease liabilities as of December 31, 2020: Operating Leases Finance Leases 2021 $ 26 $ 1 2022 21 — 2023 18 — 2024 15 — 2025 12 — Thereafter 57 — Total minimum lease payments 149 1 Less: amount representing interest (20) — Present value of net minimum lease payments 129 1 Less: current portion of lease obligations (22) (1) Long-term lease obligations $ 107 $ — |
Additional Operating Leases Not Yet Commenced | As of December 31, 2020, we had additional operating leases that have not yet commenced which included the following: Description Commencing Lease Term Total Future Lease Payments Compounding pharmacy Expected 2021 20 years $ 28 New corporate headquarters Expected 2021 20 years 78 Total $ 106 |
Goodwill and Other Intangible_2
Goodwill and Other Intangible Assets, Net (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule Changes in Goodwill | The changes in the Goodwill balances by segment for the years ended December 31, 2020 and December 31, 2019 were as follows: North America Europe APAC & Emerging Markets Total Balance at December 29, 2018 (a) $ 529 $ 172 $ 49 $ 750 Foreign currency translation — (8) (1) (9) Goodwill additions 1,280 57 16 1,353 Goodwill impairment (653) (221) (64) (938) Divestitures and related adjustments (b) (2) — — (2) Balance at December 31, 2019 1,154 — — 1,154 Goodwill additions (c) 33 — — 33 Balance at December 31, 2020 $ 1,187 $ — $ — $ 1,187 (a) Recast to conform to 2019 presentation (b) Attributable to scil; see Note 4 - Divestitures and Equity Method Investments (c) See Note 3 - Business Acquisitions North America Europe APAC & Emerging Markets Total Accumulated impairment as of December 31, 2019 $ (653) $ (221) $ (64) $ (938) Accumulated impairment as of December 31, 2020 $ (653) $ (221) $ (64) $ (938) |
Schedule of Definite-Lived Intangible Assets | Definite-lived intangible assets consisted of the following as of: December 31, 2020 Cost (a) Accumulated Net Customer relationships $ 526 $ (265) $ 261 Trademarks 64 (33) 31 Patents 30 (28) 2 Product development 403 (143) 260 Non-compete agreements 2 (1) 1 Total Other intangibles $ 1,025 $ (470) $ 555 (a) Includes $45 million primarily related to customer relationships; see Note 3 - Business Acquisitions December 31, 2019 Cost Accumulated Net Customer relationships $ 503 $ (234) $ 269 Trademarks 60 (28) 32 Patents 30 (24) 6 Product development 406 (71) 335 Non-compete agreements 2 (1) 1 Total Other intangibles $ 1,001 $ (358) $ 643 |
Amortization of Intangible Assets | The table below sets forth amortization of intangible assets: Years Ended Location 2020 2019 2018 Cost of sales $ 5 $ 4 $ — Selling, general and administrative 130 123 49 Total amortization $ 135 $ 127 $ 49 |
Estimated Future Amortization of Intangible Assets | The estimated future amortization of intangible assets as of December 31, 2020 is as follows: 2021 $ 131 2022 128 2023 114 2024 59 2025 22 Thereafter 101 Total $ 555 |
Long-term Debt and Other Borr_2
Long-term Debt and Other Borrowings, Net (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Debt Disclosure [Abstract] | |
Schedule of Debt | Long-term debt and other borrowings, net consisted of the following as of: Commencement Date Maturity Date Rate as of December 31, 2020 December 31, 2020 December 31, 2019 Revolving line of credit February 2019 February 2024 — % $ — $ — Term loan payable in quarterly installments of $15 million began March 31, 2020 February 2019 February 2024 2.6 % 1,080 1,200 Loan payable with balloon payment due at maturity February 2019 March 2023 4.0 % 6 6 Finance lease obligations 1 1 Total 1,087 1,207 Less: current maturities (1) (62) Total Long-term debt and other borrowings $ 1,086 $ 1,145 Less: unamortized debt discount (18) (20) Total Long-term debt and other borrowings, net $ 1,068 $ 1,125 |
Schedule of Credit Facility | The Credit Facility is comprised of the following: Total Amount Amount Available as of December 31, 2020 Term loan $ 1,200 $ — Revolving line of credit (a) 300 299 Total Credit Facility (b) $ 1,500 $ 299 (a) Letters of credit reduce our borrowing capacity under the revolving line of credit. At December 31, 2020, we had $1 million for letters of credit outstanding against the total $35 million sub-limit available (b) We paid $28 million of debt issuance costs related to the Credit Facilities which we deferred and amortize on an effective yield basis to interest expense |
Schedule of Maturity of Debt Obligations | The following table presents the maturities of our Long-term debt and other borrowings, net as of December 31, 2020: Credit Facility Other Debt Total Repayments 2021 $ — $ 1 $ 1 2022 60 — 60 2023 60 6 66 2024 960 — 960 Total debt maturities 1,080 7 1,087 Less: current maturities — (1) (1) Less: unamortized debt issuance costs (18) — (18) Long-term maturities $ 1,062 $ 6 $ 1,068 |
Derivatives and Financial Instr
Derivatives and Financial Instruments (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of Derivative Fair Value and Balance Sheet Location | The following table discloses the fair value and balance sheet location of our derivative instruments: Liability Derivatives Cash Flow Hedging Instruments Balance Sheet Location December 31, 2020 December 31, 2019 Interest rate swap contracts Other liabilities $ 5 $ 1 |
Schedule of Effect of Cash Flow Hedges | The effect of cash flow hedges on our consolidated and combined statements of operations was as follows: Years Ended December 31, Cash Flow Hedging Instruments Location 2020 2019 Interest rate swap contracts Interest (income) expense $ 5 $ 1 |
Fair Value Fair Value (Tables)
Fair Value Fair Value (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Fair Value Disclosures [Abstract] | |
Schedule Financial Instruments Measured at Fair Value on a Recurring Basis | The following table presents our financial instruments measured at fair value on a recurring basis and indicates the level within the fair value hierarchy: Assets Level December 31, 2020 December 31, 2019 Distrivet call option (a) 3 $ 2 $ — Total assets $ 2 $ — (a) At investment date fair value, the Distrivet call option had a fair value of $0 million Liabilities Level December 31, 2020 December 31, 2019 Interest rate swap contracts 2 $ 5 $ 1 Distrivet put option (a) 3 1 — Total liabilities $ 6 $ 1 (a) At investment date fair value, the Distrivet put option had a value of $5 million |
Commitments and Contingencies -
Commitments and Contingencies - (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of Unconditional Purchase Obligations | The following table presents the remaining unconditional purchase obligations as of December 31, 2020: Year Amount 2021 $ 8 2022 8 2023 7 2024 7 2025 6 Total $ 36 |
Redeemable Non-controlling In_2
Redeemable Non-controlling Interests (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Noncontrolling Interest [Abstract] | |
Redeemable Non-controlling Interests | The following table presents the components of change and balances of Redeemable non-controlling interests within the consolidated and combined balance sheets as of: December 31, December 31, December 29, Balance at beginning of period $ 10 $ 92 $ 368 Decrease due to redemptions (4) (74) (383) Increase due to business acquisitions (a) 24 — 6 Net income (loss) attributable to redeemable non-controlling interests 2 (3) 6 Dividends paid — — (10) Effect of foreign currency translation (gain) loss attributable to redeemable non-controlling interests (2) 1 (2) Change to redemption value 6 (6) 107 Balance at end of period $ 36 $ 10 $ 92 (a) See Note 3 - Business Acquisitions |
Accumulated Other Comprehensi_2
Accumulated Other Comprehensive Income (Loss) (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Equity [Abstract] | |
Schedule of Changes in Accumulated Other Comprehensive Loss | The following table presents the changes in Accumulated other comprehensive loss, net of applicable taxes, by component: Derivative Gain (Loss) Gain (Loss) on Pension Adjustment Foreign Currency Translation Gain (Loss) Unrealized Gain (Loss) from Foreign Currency Hedging Total Balance as of December 30, 2017 $ — $ (2) $ (41) $ 1 $ (42) Other comprehensive income (loss) attributable to Covetrus before reclassifications — 2 (41) (1) (40) Period change — 2 (41) (1) (40) Balance as of December 29, 2018 — — (82) — (82) Other comprehensive income (loss) attributable to Covetrus before reclassifications (1) — (4) — (5) Reclassified from Accumulated other comprehensive loss to earnings 1 — — — 1 Period change — — (4) — (4) Balance as of December 31, 2019 — — (86) — (86) Other comprehensive income (loss) attributable to Covetrus before reclassifications (8) — 21 — 13 Reclassified from Accumulated other comprehensive loss to earnings 5 — 2 — 7 Period change (3) — 23 — 20 Balance as of December 31, 2020 $ (3) $ — $ (63) $ — $ (66) |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Schedule of Income Before Taxes and Equity in Earnings of Affiliates | Income (loss) before taxes and equity in earnings of affiliates were as follows: Years Ended December 31, December 31, December 29, Domestic $ (164) $ (809) $ 59 Foreign 140 (220) 84 Total income (loss) before taxes and equity in earnings of affiliates $ (24) $ (1,029) $ 143 |
Schedule of Provisions for Income Taxes | The provisions for income taxes were as follows: Years Ended December 31, 2020 December 31, 2019 (as revised) December 29, 2018 Current income tax (benefit) expense: U.S. federal $ 1 $ — $ 13 State and local 2 2 4 Foreign 22 16 25 Total current income tax (benefit) expense 25 18 42 Deferred income tax (benefit) expense: U.S. federal (25) (46) — State and local (1) (10) — Foreign (6) (8) (5) Total deferred income tax (benefit) expense: (32) (64) (5) Total income tax (benefit) expense $ (7) $ (46) $ 37 As of December 31, 2018 Previously Reported Revision As Revised Net Parent investment $ 1,576 $ (42) $ 1,534 Total shareholders’ equity 1,494 (42) 1,452 As of December 31, 2019 Consolidated Balance Sheet Previously Reported Revision As Revised Non-current deferred income tax assets, net (a) $ 20 $ (2) $ 18 Total assets 3,361 (2) 3,359 Deferred income taxes 47 1 48 Total liabilities 2,095 1 2,096 Additional paid in capital 2,381 (42) 2,339 Accumulated deficit (1,040) 39 (1,001) Total shareholders’ equity 1,256 (3) 1,253 Total liabilities, redeemable non-controlling interests, and shareholders’ equity $ 3,361 $ (2) $ 3,359 (a) Included in Investments and other Year Ended December 31, 2019 Consolidated Statement of Operations Previously Reported Revision As Revised Income tax benefit (expense) $ 7 $ 39 $ 46 Net income (loss) (1,022) 39 (983) Net income (loss) attributable to Covetrus $ (1,019) $ 39 $ (980) Earnings (Loss) per share attributable to Covetrus: Basic $ (9.50) $ 0.36 $ (9.14) Diluted $ (9.50) $ 0.36 $ (9.14) |
Schedule of Deferred Tax Assets and Liabilities | Significant components of our deferred tax assets and liabilities were as follows: Years Ended December 31, December 31, 2019 (as revised) Deferred income tax assets: Investment in partnerships $ — $ 54 Net operating losses and other carryforwards 41 38 Share-based compensation 6 7 Lease asset 20 6 Other assets 17 6 Total deferred income tax assets 84 111 Valuation allowance for deferred tax assets (11) (10) Net deferred income tax assets 73 101 Deferred income tax liabilities: Intangibles amortization (74) (125) Other liabilities (18) (6) Total deferred income tax liabilities (92) (131) Net deferred income tax assets (liabilities) $ (19) $ (30) The deferred income tax assets (liabilities) are classified in the consolidated balance sheets as follows: December 31, December 31, 2019 (as revised) Non-current deferred income tax assets, net (a) $ 9 $ 18 Non-current deferred income tax liabilities, net (28) (48) Non-current deferred income tax assets (liabilities) $ (19) $ (30) (a) Included in Investments and other |
Schedule of Tax Loss Carryforwards | At December 31, 2020, we had the following tax loss and tax credit carryforwards available to offset taxable income in prior and future years: Amount Expiration Period U.S. federal tax loss carryforwards $ 20 2030 - unlimited U.S. federal and state interest carryforwards 8 unlimited U.S. federal other credit carryforwards 2 2030-2040 U.S. state tax loss carryforwards 4 2021 - unlimited Non-U.S. tax loss carryforwards 7 2021 - unlimited Total tax loss and tax credit carryforwards $ 41 |
Summary of Tax Credit Carryforwards | At December 31, 2020, we had the following tax loss and tax credit carryforwards available to offset taxable income in prior and future years: Amount Expiration Period U.S. federal tax loss carryforwards $ 20 2030 - unlimited U.S. federal and state interest carryforwards 8 unlimited U.S. federal other credit carryforwards 2 2030-2040 U.S. state tax loss carryforwards 4 2021 - unlimited Non-U.S. tax loss carryforwards 7 2021 - unlimited Total tax loss and tax credit carryforwards $ 41 |
Schedule of Effective Income Tax Rate Reconciliation | The tax provision (benefit) differs from the amount computed by applying the federal statutory income tax rate due to the following: Years Ended December 31, December 31, December 29, Income tax provision at federal statutory rate 21.0 % 21 % 21.0 % Transition tax on deemed repatriation of foreign earnings — — 2.8 Pass through non-controlling interest — — (2.1) State income tax provision, net of federal income tax effect (3.7) 0.9 1.4 Foreign income tax (benefit) provision 15.7 0.3 1.4 Tax on GILTI (42.6) (0.9) 1.4 Excess tax benefits related to share-based compensation (28.4) (0.5) (0.7) Revaluation of deferred tax assets and liabilities — (0.9) — Valuation allowance impacts (2.2) (0.5) — Goodwill impairment — (14.4) — Non-deductible expenses (29.3) (0.6) — Reverse Book Gain/(Loss) on Foreign Sales 69.2 0.3 — Return to Provision 12.1 — — Impact of Partnership Inside/Outside Basis Conversion 7.5 — — Impact of Uncertain Tax Positions 2.2 0.1 — Credits 6.6 — — Other 0.8 (0.3) 0.7 Effective tax rate 28.9 % 4.5 % 25.9 % |
Schedule of Reconciliation of Unrecognized Tax Benefits | The following table provides a reconciliation of unrecognized tax benefits which are included in Other liabilities within the balance sheets: Years Ended December 31, December 31, December 29, Balance at beginning of period $ 4 $ 6 $ 8 Additions based on prior year tax positions (1) — 2 Reductions from lapse in statutes of limitations — (2) (4) Balance at end of period $ 3 $ 4 $ 6 |
Earnings (Loss) Per Share (Tabl
Earnings (Loss) Per Share (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Earnings Per Share [Abstract] | |
Schedule of Earnings Per Share, Basic and Diluted | The following is a reconciliation of the numerator and denominator of the basic and diluted EPS computation for net (loss) earnings per share: December 31, December 31, 2019 (b) December 29, Numerator: Net income (loss) attributable to Covetrus $ (19) $ (980) $ 101 Adjustment for: Dividends declared on Series A preferred stock (7) — — Income (loss) available to common shareholders $ (26) $ (980) $ 101 Denominator: Basic Weighted-average common shares outstanding 118 107 71 Diluted Effect of dilutive shares — — 1 Diluted shares 118 107 72 Earnings (loss) per share attributable to Covetrus: Basic $ (0.22) $ (9.14) $ 1.41 Diluted $ (0.22) $ (9.14) $ 1.40 Potentially dilutive securities (a) 6 6 — (a) Potentially dilutive securities attributable to outstanding stock options, restricted stock units, restricted stock awards, and performance stock units were excluded from the computation of diluted earnings per share because the securities would have had an antidilutive effect (b) See Note 16 - Income Taxes for discussion related to revisions to Net income (loss) attributable to Covetrus and Earnings (loss) per share |
Share-based Compensation and _2
Share-based Compensation and Other Employee Benefits (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Summarizes of Stock Option Activity | The following table summarizes our stock option activity under the Plan for the year ended December 31, 2020: (In millions, except per share amounts) Number Weighted- Weighted- Aggregate Outstanding at beginning of year 4 $ 15.29 Granted — — Exercised (1) 6.80 Forfeited (1) 28.59 Outstanding at end of year 2 $ 15.58 6.9 $ 31 Exercisable at end of year 1 $ 11.99 6.6 $ 24 |
Schedule of Weighted-average Grant-date Fair Value and related Valuation Assumptions | The following table provides the weighted-average grant-date fair value and related valuation assumptions for these awards granted during the year ended December 31, 2019: Weighted-average grant-date fair value $12.19 Valuation assumption ranges: Expected term (years) 6.0 Risk-free interest rate 1.8 % - 2.5% Expected volatility 29.6 % - 30.0% |
Schedule of Summary of RSA/RSU Activity | The following table summarizes our RSA/RSU activity under the Plan for the year ended December 31, 2020: Number of Shares Weighted-average Weighted-average Aggregate Nonvested at beginning of year 2 $ 25.69 Granted 3 11.51 Vested (1) 28.24 Forfeited — 19.37 Nonvested at end of year 4 $ 14.07 1.25 $ 124 The weighted-average grant-date fair values for these awards granted: Years Ended 2020 2019 2018 Weighted-average grant-date fair value $ 11.51 $ 27.83 $ 65.26 |
Additional Information for Share-based Awards | The following table provides further information related to our share-based awards: Years Ended 2020 2019 2018 Intrinsic value of stock options exercised $ 13 $ 15 $ — Fair value of RSA/RSU shares vested $ 6 $ 3 $ 2 |
Segment Data (Tables)
Segment Data (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Segment Reporting [Abstract] | |
Schedule of Adjusted EBITA by Reportable Segment to Consolidated Net Income (Loss) | The following tables reflect our segment information and Corporate, the segment recast for the prior years, and reconciles Adjusted EBITDA for reportable segments to consolidated net income (loss) attributable to Covetrus: At and For the Year Ended December 31, 2020 North America Europe APAC & Emerging Markets Corporate Eliminations Total Net sales $ 2,377 $ 1,571 $ 402 $ — $ (11) $ 4,339 Adjusted EBITDA $ 187 $ 72 $ 28 $ (61) $ — $ 226 Depreciation and amortization $ 144 $ 17 $ 5 $ — $ — $ 166 Income tax benefit (expense) $ 19 $ (11) $ (6) $ 5 $ — $ 7 Total assets $ 3,077 $ 713 $ 188 $ 1,415 $ (1,897) $ 3,496 Expenditures for long-lived assets $ 41 $ 11 $ 3 $ 3 $ — $ 58 Reconciliation of Net Income (Loss) Attributable to Covetrus to Adjusted EBITDA: Net income (loss) attributable to Covetrus $ (19) Plus: Depreciation and amortization 166 Plus: Interest expense, net 47 Less: Income tax (benefit) expense (7) Earnings (loss) before interest, taxes, depreciation, and amortization 187 Plus: Share-based compensation 40 Plus: Strategic consulting 20 Plus: Transaction costs (a) 8 Plus: Separation programs and executive severance 11 Plus: IT infrastructure 4 Plus: Formation of Covetrus (b) 19 Plus: Capital structure 2 Plus: Equity method investments and non-consolidated affiliates (c) 2 Plus: Operating lease right-of-use asset impairment 8 Plus: France managed exit (d) 7 Less: Other items, net (e) (82) Adjusted EBITDA 226 (a) Includes legal, accounting, tax, and other professional fees incurred in connection with acquisitions and divestitures (b) Includes professional and consulting fees, duplicative costs associated with transition service agreements, and other costs incurred in connection with the separation from Former Parent and establishing Covetrus as an independent public company (c) Includes the proportionate share of the adjustments to EBITDA of consolidated and non-consolidated affiliates where Covetrus ownership is less than 100% (d) Includes $6 million of severance and $1 million of other costs. See Note 4 - Divestitures and Equity Method Investments for further discussion (e) Includes a pre-tax gain of $73 million from the sale of scil, a $6 million mark-to-market adjustment for our Distrivet options, and a $1 million gain on the deconsolidation of SAHS. See Note 4 - Divestitures and Equity Method Investments At and For the Year Ended December 31, 2019 North America Europe APAC & Emerging Markets Corporate Eliminations Total Net sales $ 2,111 $ 1,509 $ 368 $ — $ (12) $ 3,976 Adjusted EBITDA $ 153 $ 68 $ 18 $ (39) $ — $ 200 Depreciation and amortization $ 131 $ 18 $ 6 $ — $ — $ 155 Income tax benefit (expense) $ 47 $ (3) $ (4) $ 6 $ — $ 46 Total assets $ 2,939 $ 726 $ 137 $ 783 $ (1,226) $ 3,359 Expenditures for long-lived assets $ 23 $ 10 $ 1 $ 5 $ — $ 39 Reconciliation of Net Income (Loss) Attributable to Covetrus to Adjusted EBITDA: Net income (loss) attributable to Covetrus $ (980) Plus: Depreciation and amortization 155 Plus: Interest expense, net 53 Less: Income tax (benefit) expense (46) Earnings (loss) before interest, taxes, depreciation, and amortization (818) Plus: Share-based compensation 46 Plus: Strategic consulting 2 Plus: Transaction costs (a) 2 Plus: Formation of Covetrus (b) 31 Plus: Separation programs and executive severance 11 Plus: Carve-out operating expenses 5 Plus: IT infrastructure 6 Plus: Goodwill impairment 938 Less: Equity method investments and non-consolidated affiliates (c) (4) Less: Other items, net (d) (19) Adjusted EBITDA $ 200 (a) Includes legal, accounting, tax, and other professional fees incurred in connection with acquisitions and divestitures (b)Includes professional and consulting fees, duplicative costs associated with transition service agreements, and other costs incurred in connection with the separation from Former Parent and establishing Covetrus as an independent public company (c) Includes the proportionate share of the adjustments to EBITDA of consolidated and non-consolidated affiliates where Covetrus ownership is less than 100% (d) Includes $15 million of gains associated with acquisitions in France and Romania, $2 million gain on legacy investment, and $1 million government grant income At and For the Year Ended December 29, 2018 North America Europe APAC & Emerging Markets Corporate Eliminations Total Net sales $ 1,939 $ 1,463 $ 387 $ — $ (11) $ 3,778 Adjusted EBITDA $ 157 $ 75 $ 19 $ (32) $ — $ 219 Depreciation and amortization $ 41 $ 17 $ 6 $ — $ — $ 64 Income tax expense $ (18) $ (15) $ (3) $ (1) $ — $ (37) Total assets $ 1,302 $ 702 $ 182 $ 10 $ (4) $ 2,192 Expenditures for long-lived assets $ 14 $ 7 $ 1 $ — $ — $ 22 Reconciliation of Net Income (Loss) Attributable to Covetrus to Adjusted EBITDA: Net income (loss) attributable to Covetrus $ 101 Plus: Depreciation and amortization 64 Plus: Interest expense, net 2 Plus: Income tax (benefit) expense 37 Earnings (loss) before interest, taxes, depreciation, and amortization 204 Plus: Share-based compensation 7 Plus: Separation programs and executive severance 9 Less: Equity method investments and non-consolidated affiliates (1) Adjusted EBITDA $ 219 See Note 5 - Revenue from Contracts with Customers |
Summary of Quarterly Data (Un_2
Summary of Quarterly Data (Unaudited) (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Quarterly Financial Information Disclosure [Abstract] | |
Summary of Quarterly Data | A summary of quarterly data follows: For the Three Months Ended December 31, September 30, June 30, March 31, Net sales $ 1,121 $ 1,126 $ 1,026 $ 1,065 Gross profit $ 206 $ 197 $ 192 $ 202 Goodwill impairment $ — $ — $ — $ — Operating income (loss) $ (19) $ (27) $ (4) $ (20) Net income (loss) attributable to Covetrus $ (4) $ (35) $ 54 $ (33) Earnings (loss) per share: Basic $ (0.04) $ (0.33) $ 0.40 $ (0.30) Diluted $ (0.04) $ (0.33) $ 0.40 $ (0.30) For the Three Months Ended December 31, September 30, June 30, March 31, Net sales $ 1,008 $ 1,018 $ 1,009 $ 941 Gross profit (a) $ 188 $ 191 $ 193 $ 177 Goodwill impairment $ (1) $ 939 $ — $ — Operating income (loss) $ (25) $ (958) $ (5) $ (9) Net income (loss) attributable to Covetrus (b) $ (37) $ (920) $ (10) $ (13) Earnings (Loss) per share: (b) Basic $ (0.33) $ (8.22) $ (0.09) $ (0.14) Diluted $ (0.33) $ (8.22) $ (0.09) $ (0.14) (a) 2019 quarterly data reflects a reclassification of Vets First Choice shipping expenses that were previously included in Selling, general and administrative into Cost of sales to classify these Vets First Choice shipping expenses consistently with the rest of our business (b) The third quarter ended September 30, 2019 includes a revision (see Note 16 - Income Taxes) |
Business Overview and Signifi_3
Business Overview and Significant Accounting Policies (Details) $ in Millions | Feb. 07, 2019USD ($) | Dec. 31, 2020USD ($)supplier | Dec. 31, 2019USD ($)supplier | Dec. 29, 2018USD ($) | Dec. 30, 2017USD ($) |
Business Acquisition [Line Items] | |||||
Total shareholders’ equity | $ 1,537 | $ 1,253 | $ 1,452 | $ 1,215 | |
Advertising expense | $ 17 | $ 17 | 16 | ||
Cost of Goods and Service Benchmark | Supplier Concentration Risk | |||||
Business Acquisition [Line Items] | |||||
Number of suppliers | supplier | 5 | 5 | |||
Concentration risk, percentage | 50.00% | 50.00% | |||
Net Former Parent Investment | |||||
Business Acquisition [Line Items] | |||||
Total shareholders’ equity | $ 0 | $ 0 | 1,534 | 1,257 | |
Share Sale | |||||
Business Acquisition [Line Items] | |||||
Issuance of common shares in connection with the merger | $ 361 | ||||
Henry Schein | |||||
Business Acquisition [Line Items] | |||||
Cash dividend paid to sole shareholder | $ 1,200 | ||||
Vets First Choice | |||||
Business Acquisition [Line Items] | |||||
Percentage ownership, noncontrolling interest | 37.00% | ||||
Henry Schein | Henry Schein | |||||
Business Acquisition [Line Items] | |||||
Percentage ownership, parent | 63.00% | ||||
Revision | |||||
Business Acquisition [Line Items] | |||||
Total shareholders’ equity | $ (3) | (42) | |||
Revision | Net Former Parent Investment | |||||
Business Acquisition [Line Items] | |||||
Total shareholders’ equity | $ (42) | $ 42 |
Novel Coronavirus Disease 201_2
Novel Coronavirus Disease 2019 ("COVID-19") (Details) - Series A Preferred Stock - Share Sale - USD ($) $ in Millions | May 31, 2020 | Apr. 30, 2020 | May 31, 2020 |
Debt Instrument [Line Items] | |||
Dividend rate, percentage | 7.50% | ||
Proceeds from issuance of private placement, net | $ 244 | $ 244 |
Business Acquisitions - Narrati
Business Acquisitions - Narrative (Details) $ in Millions | 3 Months Ended | 11 Months Ended | 12 Months Ended | |||
Dec. 31, 2019USD ($) | Sep. 30, 2019USD ($) | Dec. 31, 2019USD ($) | Dec. 31, 2020shares | Oct. 07, 2020managementGroup | Feb. 07, 2019USD ($) | |
Veterinary Study Groups, Inc. | ||||||
Business Acquisition [Line Items] | ||||||
Interest acquired in Veterinary Study Groups, Inc | 80.00% | |||||
Number of veterinary management groups acquired | managementGroup | 50 | |||||
Trademarks and Trade Names | ||||||
Business Acquisition [Line Items] | ||||||
Useful life | 5 years | |||||
Product Formulas | ||||||
Business Acquisition [Line Items] | ||||||
Useful life | 11 years | |||||
Customer Relationships | ||||||
Business Acquisition [Line Items] | ||||||
Useful life | 11 years | |||||
Developed Technology Rights | ||||||
Business Acquisition [Line Items] | ||||||
Useful life | 5 years | |||||
Vets First Choice | ||||||
Business Acquisition [Line Items] | ||||||
Reduction to purchase price | $ 30 | |||||
Shares canceled (in shares) | shares | 700,400 | |||||
Goodwill adjustment | $ 4 | |||||
Intangible assets | $ 545 | |||||
Weighted-average amortization period | 7 years | |||||
Revenue | $ 246 | |||||
Net loss | $ (525) | |||||
Vets First Choice | Trademarks and Trade Names | ||||||
Business Acquisition [Line Items] | ||||||
Intangible assets | 20 | |||||
Vets First Choice | Product Formulas | ||||||
Business Acquisition [Line Items] | ||||||
Intangible assets | 50 | |||||
Vets First Choice | Customer Relationships | ||||||
Business Acquisition [Line Items] | ||||||
Intangible assets | 125 | |||||
Vets First Choice | Developed Technology Rights | ||||||
Business Acquisition [Line Items] | ||||||
Intangible assets | $ 350 |
Business Acquisitions - Conside
Business Acquisitions - Consideration Transferred Vets First Choice (Details) - Vets First Choice $ / shares in Units, $ in Millions | Feb. 07, 2019USD ($)$ / sharesshares |
Business Acquisition [Line Items] | |
Total Covetrus shares issued to Vets First Choice shareholders (in shares) | shares | 39,041,689 |
Per share price (in actuals) (in usd per share) | $ / shares | $ 43.05 |
Total fair value of shares issued to Vets First Choice shareholders | $ 1,681 |
Fair value of Vets First Choice replacement stock option awards attributable to pre-acquisition service | 62 |
Vets First Choice debt repaid at close | 24 |
Vets First Choice expenses paid at close | 18 |
Less: Vets First Choice cash used to fund transaction | (9) |
Total consideration | $ 1,776 |
Business Acquisitions - Summary
Business Acquisitions - Summary of Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Millions | Dec. 31, 2020 | Dec. 31, 2019 | Feb. 07, 2019 | Dec. 29, 2018 |
Business Acquisition [Line Items] | ||||
Goodwill | $ 1,187 | $ 1,154 | $ 750 | |
Vets First Choice | ||||
Business Acquisition [Line Items] | ||||
Fair value of net assets acquired | $ 14 | |||
Goodwill | 1,324 | |||
Intangible assets | 545 | |||
Deferred tax liabilities | (107) | |||
Total acquisition cost | $ 1,776 |
Business Acquisitions - Unaudit
Business Acquisitions - Unaudited Pro Forma Financial Information (Details) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2020 | Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 29, 2018 | |
Business Acquisition [Line Items] | |||||||||||
Goodwill impairment | $ 0 | $ 0 | $ 0 | $ 0 | $ (1) | $ 939 | $ 0 | $ 0 | $ 0 | $ 938 | $ 0 |
Vets First Choice | |||||||||||
Business Acquisition [Line Items] | |||||||||||
Net sales | 4,000 | 3,981 | |||||||||
Goodwill impairment | 938 | 0 | |||||||||
Net income (loss) | (983) | (63) | |||||||||
Net income (loss) attributable to Covetrus | $ (980) | $ (63) |
Divestitures and Equity Metho_2
Divestitures and Equity Method Investment (Details) - USD ($) $ in Millions | Apr. 30, 2021 | Apr. 30, 2020 | Dec. 31, 2020 | Jun. 30, 2020 | Dec. 31, 2020 | Apr. 01, 2020 | Jan. 13, 2020 |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||||
Put and call options exercisable, percent | 49.99% | ||||||
Facility Closing | |||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||||
Severance benefits | $ 6 | $ 6 | |||||
Inventory write-down | 1 | ||||||
scil | Held-for-sale | |||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||||
Purchase price | $ 110 | ||||||
Pre-tax gain on divestiture | 73 | ||||||
Foreign exchange adjustment | 1 | ||||||
Distrivet | |||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||||
Payments to acquire businesses, gross | $ 11 | ||||||
Ownership percentage | 50.01% | ||||||
Payment to Acquire Business, Additional Payment Deadline | 1 year | ||||||
Forecast | Subsequent event | Distrivet | |||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||||
Payments to acquire businesses, gross | $ 13 | ||||||
Investments and Other | Distrivet | |||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||||
Equity method investments | $ 45 | ||||||
Other, Net | Distrivet | |||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||||
Realized gain (loss) on disposal | $ 1 | ||||||
Equity method investment, fair value disclosure | $ 50 | $ 50 |
Revenue from Contracts with C_3
Revenue from Contracts with Customers - Disaggregation of Revenue (Details) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2020 | Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 29, 2018 | |
Disaggregation of Revenue [Line Items] | |||||||||||
Net sales | $ 1,121 | $ 1,126 | $ 1,026 | $ 1,065 | $ 1,008 | $ 1,018 | $ 1,009 | $ 941 | $ 4,339 | $ 3,976 | $ 3,778 |
Product and services eliminations | |||||||||||
Disaggregation of Revenue [Line Items] | |||||||||||
Net sales | (89) | (47) | (12) | ||||||||
Geography Eliminations | |||||||||||
Disaggregation of Revenue [Line Items] | |||||||||||
Net sales | (11) | (12) | (11) | ||||||||
North America | |||||||||||
Disaggregation of Revenue [Line Items] | |||||||||||
Net sales | 2,377 | 2,111 | 1,939 | ||||||||
North America | Operating Segments | |||||||||||
Disaggregation of Revenue [Line Items] | |||||||||||
Net sales | 2,377 | 2,111 | 1,939 | ||||||||
North America | Product and services eliminations | |||||||||||
Disaggregation of Revenue [Line Items] | |||||||||||
Net sales | (76) | (33) | (2) | ||||||||
Europe | |||||||||||
Disaggregation of Revenue [Line Items] | |||||||||||
Net sales | 1,571 | 1,509 | 1,463 | ||||||||
Europe | Operating Segments | |||||||||||
Disaggregation of Revenue [Line Items] | |||||||||||
Net sales | 1,571 | 1,509 | 1,463 | ||||||||
Europe | Product and services eliminations | |||||||||||
Disaggregation of Revenue [Line Items] | |||||||||||
Net sales | (13) | (14) | (10) | ||||||||
APAC & Emerging Markets | |||||||||||
Disaggregation of Revenue [Line Items] | |||||||||||
Net sales | 402 | 368 | 387 | ||||||||
APAC & Emerging Markets | Operating Segments | |||||||||||
Disaggregation of Revenue [Line Items] | |||||||||||
Net sales | 402 | 368 | 387 | ||||||||
APAC & Emerging Markets | Product and services eliminations | |||||||||||
Disaggregation of Revenue [Line Items] | |||||||||||
Net sales | 0 | 0 | 0 | ||||||||
Supply Chain Services | Operating Segments | |||||||||||
Disaggregation of Revenue [Line Items] | |||||||||||
Net sales | 3,926 | 3,678 | 3,689 | ||||||||
Supply Chain Services | Geography Eliminations | |||||||||||
Disaggregation of Revenue [Line Items] | |||||||||||
Net sales | (11) | (12) | (11) | ||||||||
Supply Chain Services | North America | Operating Segments | |||||||||||
Disaggregation of Revenue [Line Items] | |||||||||||
Net sales | 1,969 | 1,816 | 1,858 | ||||||||
Supply Chain Services | Europe | Operating Segments | |||||||||||
Disaggregation of Revenue [Line Items] | |||||||||||
Net sales | 1,574 | 1,513 | 1,462 | ||||||||
Supply Chain Services | APAC & Emerging Markets | Operating Segments | |||||||||||
Disaggregation of Revenue [Line Items] | |||||||||||
Net sales | 394 | 361 | 380 | ||||||||
Software Services | Operating Segments | |||||||||||
Disaggregation of Revenue [Line Items] | |||||||||||
Net sales | 96 | 99 | 101 | ||||||||
Software Services | Geography Eliminations | |||||||||||
Disaggregation of Revenue [Line Items] | |||||||||||
Net sales | 0 | 0 | 0 | ||||||||
Software Services | North America | Operating Segments | |||||||||||
Disaggregation of Revenue [Line Items] | |||||||||||
Net sales | 78 | 82 | 83 | ||||||||
Software Services | Europe | Operating Segments | |||||||||||
Disaggregation of Revenue [Line Items] | |||||||||||
Net sales | 10 | 10 | 11 | ||||||||
Software Services | APAC & Emerging Markets | Operating Segments | |||||||||||
Disaggregation of Revenue [Line Items] | |||||||||||
Net sales | 8 | 7 | 7 | ||||||||
Prescription Management | Operating Segments | |||||||||||
Disaggregation of Revenue [Line Items] | |||||||||||
Net sales | 406 | 246 | 0 | ||||||||
Prescription Management | Geography Eliminations | |||||||||||
Disaggregation of Revenue [Line Items] | |||||||||||
Net sales | 0 | 0 | 0 | ||||||||
Prescription Management | North America | Operating Segments | |||||||||||
Disaggregation of Revenue [Line Items] | |||||||||||
Net sales | 406 | 246 | 0 | ||||||||
Prescription Management | Europe | Operating Segments | |||||||||||
Disaggregation of Revenue [Line Items] | |||||||||||
Net sales | 0 | 0 | 0 | ||||||||
Prescription Management | APAC & Emerging Markets | Operating Segments | |||||||||||
Disaggregation of Revenue [Line Items] | |||||||||||
Net sales | $ 0 | $ 0 | $ 0 |
Revenue from Contracts with C_4
Revenue from Contracts with Customers - Schedule of Receivables, Contract Assets, and Contract Liabilities (Details) - USD ($) $ in Millions | Dec. 31, 2020 | Dec. 31, 2019 |
Accounts receivable: | ||
Accounts receivable, net | $ 507 | $ 426 |
Contract liabilities: | ||
Deferred revenue, current | $ 22 | $ 37 |
Property and Equipment, Net (De
Property and Equipment, Net (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 29, 2018 | |
Property, Plant and Equipment [Line Items] | |||
Total property and equipment, gross | $ 222 | $ 177 | |
Less: accumulated depreciation and amortization | (106) | (84) | |
Total Property and equipment, net | 116 | 93 | |
Depreciation and amortization expense | 31 | 28 | $ 15 |
Cost of sales | |||
Property, Plant and Equipment [Line Items] | |||
Depreciation and amortization expense | 1 | 3 | 2 |
Selling, general and administrative | |||
Property, Plant and Equipment [Line Items] | |||
Depreciation and amortization expense | 30 | 25 | $ 13 |
Land | |||
Property, Plant and Equipment [Line Items] | |||
Total property and equipment, gross | 1 | 1 | |
Buildings and permanent improvements | |||
Property, Plant and Equipment [Line Items] | |||
Total property and equipment, gross | $ 10 | 9 | |
Buildings and permanent improvements | Minimum | |||
Property, Plant and Equipment [Line Items] | |||
Estimated Useful Life | 10 years | ||
Buildings and permanent improvements | Maximum | |||
Property, Plant and Equipment [Line Items] | |||
Estimated Useful Life | 40 years | ||
Leasehold improvements | |||
Property, Plant and Equipment [Line Items] | |||
Total property and equipment, gross | $ 21 | 20 | |
Machinery and warehouse equipment | |||
Property, Plant and Equipment [Line Items] | |||
Total property and equipment, gross | $ 45 | 44 | |
Machinery and warehouse equipment | Minimum | |||
Property, Plant and Equipment [Line Items] | |||
Estimated Useful Life | 2 years | ||
Machinery and warehouse equipment | Maximum | |||
Property, Plant and Equipment [Line Items] | |||
Estimated Useful Life | 12 years | ||
Furniture, fixtures, and other | |||
Property, Plant and Equipment [Line Items] | |||
Total property and equipment, gross | $ 46 | 36 | |
Furniture, fixtures, and other | Minimum | |||
Property, Plant and Equipment [Line Items] | |||
Estimated Useful Life | 2 years | ||
Furniture, fixtures, and other | Maximum | |||
Property, Plant and Equipment [Line Items] | |||
Estimated Useful Life | 10 years | ||
Computer equipment and software | |||
Property, Plant and Equipment [Line Items] | |||
Total property and equipment, gross | $ 76 | 57 | |
Computer equipment and software | Minimum | |||
Property, Plant and Equipment [Line Items] | |||
Estimated Useful Life | 2 years | ||
Computer equipment and software | Maximum | |||
Property, Plant and Equipment [Line Items] | |||
Estimated Useful Life | 10 years | ||
Construction in Progress | |||
Property, Plant and Equipment [Line Items] | |||
Total property and equipment, gross | $ 23 | $ 10 |
Leases - Narrative (Details)
Leases - Narrative (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 29, 2018 | |
Lessee, Lease, Description [Line Items] | |||
Operating lease, cost | $ 30 | $ 25 | |
CAM and taxes | $ 3 | $ 2 | |
Rent expense | $ 20 | ||
Minimum | |||
Lessee, Lease, Description [Line Items] | |||
Remaining lease term | 1 year | ||
Maximum | |||
Lessee, Lease, Description [Line Items] | |||
Remaining lease term | 14 years |
Leases - Supplemental Balance S
Leases - Supplemental Balance Sheet (Details) - USD ($) $ in Millions | Dec. 31, 2020 | Dec. 31, 2019 |
Lessee, Operating Lease, Description [Abstract] | ||
Operating lease right-of-use assets, net | $ 117 | $ 84 |
Accrued expenses, other | 22 | 19 |
Other liabilities | $ 107 | $ 67 |
Operating Lease, Liability, Statement of Financial Position [Extensible List] | us-gaap:OtherLiabilities | us-gaap:OtherLiabilities |
Operating Lease, Liability, Current, Statement of Financial Position [Extensible List] | us-gaap:AccountsPayableAndAccruedLiabilitiesCurrent | us-gaap:AccountsPayableAndAccruedLiabilitiesCurrent |
Total operating lease liabilities | $ 129 | $ 86 |
Finance Leases: | ||
Property and equipment, net | $ 1 | $ 2 |
Finance Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List] | us-gaap:OtherAssets | us-gaap:OtherAssets |
Current maturities of long-term debt and other borrowings | $ 1 | $ 1 |
Finance Lease, Liability, Current, Statement of Financial Position [Extensible List] | us-gaap:DebtCurrent | us-gaap:DebtCurrent |
Total finance lease liabilities | $ 1 | $ 1 |
Weighted-average remaining lease term: | ||
Operating leases | 8 years 1 month 6 days | 6 years 9 months 18 days |
Finance leases | 2 years 6 months | 2 years 4 months 24 days |
Weighted-average discount rate: | ||
Operating leases | 3.50% | 3.50% |
Finance leases | 3.80% | 8.10% |
Leases - Lease Maturities (Deta
Leases - Lease Maturities (Details) - USD ($) $ in Millions | Dec. 31, 2020 | Dec. 31, 2019 |
Operating Leases | ||
2021 | $ 26 | |
2022 | 21 | |
2023 | 18 | |
2024 | 15 | |
2025 | 12 | |
Thereafter | 57 | |
Total minimum lease payments | 149 | |
Less: amount representing interest | (20) | |
Total operating lease liabilities | 129 | $ 86 |
Less: current portion of lease obligations | (22) | (19) |
Other liabilities | 107 | 67 |
Finance Lease, Liability, Payment, Due [Abstract] | ||
2021 | 1 | |
2022 | 0 | |
2023 | 0 | |
2024 | 0 | |
2025 | 0 | |
Thereafter | 0 | |
Total minimum lease payments | 1 | |
Less: amount representing interest | 0 | |
Total finance lease liabilities | 1 | 1 |
Less: current portion of lease obligations | (1) | $ (1) |
Long-term lease obligations | $ 0 |
Leases - Additional Operating L
Leases - Additional Operating Leases Not Yet Commenced (Details) $ in Millions | Dec. 31, 2020USD ($) |
Lessee, Lease, Description [Line Items] | |
Commencing | $ 106 |
Compounding pharmacy | |
Lessee, Lease, Description [Line Items] | |
Lease Term | 20 years |
Commencing | $ 28 |
New corporate headquarters | |
Lessee, Lease, Description [Line Items] | |
Lease Term | 20 years |
Commencing | $ 78 |
Goodwill and Other Intangible_3
Goodwill and Other Intangible Assets, Net - Schedule Changes in Goodwill (Details) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2020 | Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 29, 2018 | |
Goodwill [Roll Forward] | |||||||||||
Beginning Balance | $ 1,154 | $ 750 | $ 1,154 | $ 750 | |||||||
Foreign currency translation | (9) | ||||||||||
Goodwill additions | 33 | 1,353 | |||||||||
Goodwill impairment | $ 0 | $ 0 | $ 0 | 0 | $ 1 | $ (939) | $ 0 | 0 | 0 | (938) | $ 0 |
Divestitures and related adjustments | (2) | ||||||||||
Ending Balance | 1,187 | 1,154 | 1,187 | 1,154 | 750 | ||||||
Accumulated impairment at period end | (938) | (938) | (938) | (938) | |||||||
North America | |||||||||||
Goodwill [Roll Forward] | |||||||||||
Beginning Balance | 1,154 | 529 | 1,154 | 529 | |||||||
Foreign currency translation | 0 | ||||||||||
Goodwill additions | 33 | 1,280 | |||||||||
Goodwill impairment | (653) | ||||||||||
Divestitures and related adjustments | (2) | ||||||||||
Ending Balance | 1,187 | 1,154 | 1,187 | 1,154 | 529 | ||||||
Accumulated impairment at period end | (653) | (653) | (653) | (653) | |||||||
Europe | |||||||||||
Goodwill [Roll Forward] | |||||||||||
Beginning Balance | 0 | 172 | 0 | 172 | |||||||
Foreign currency translation | (8) | ||||||||||
Goodwill additions | 0 | 57 | |||||||||
Goodwill impairment | (221) | ||||||||||
Divestitures and related adjustments | 0 | ||||||||||
Ending Balance | 0 | 0 | 0 | 0 | 172 | ||||||
Accumulated impairment at period end | (221) | (221) | (221) | (221) | |||||||
APAC & Emerging Markets | |||||||||||
Goodwill [Roll Forward] | |||||||||||
Beginning Balance | $ 0 | $ 49 | 0 | 49 | |||||||
Foreign currency translation | (1) | ||||||||||
Goodwill additions | 0 | 16 | |||||||||
Goodwill impairment | (64) | ||||||||||
Divestitures and related adjustments | 0 | ||||||||||
Ending Balance | 0 | 0 | 0 | 0 | $ 49 | ||||||
Accumulated impairment at period end | $ (64) | $ (64) | $ (64) | $ (64) |
Goodwill and Other Intangible_4
Goodwill and Other Intangible Assets, Net - Schedule of Definite-Lived Intangible Assets (Details) - USD ($) $ in Millions | Dec. 31, 2020 | Dec. 31, 2019 |
Finite-Lived Intangible Assets [Line Items] | ||
Cost | $ 1,025 | $ 1,001 |
Accumulated Amortization | (470) | (358) |
Net | 555 | 643 |
Customer Relationships | ||
Finite-Lived Intangible Assets [Line Items] | ||
Cost | 526 | 503 |
Accumulated Amortization | (265) | (234) |
Net | 261 | 269 |
Trademarks | ||
Finite-Lived Intangible Assets [Line Items] | ||
Cost | 64 | 60 |
Accumulated Amortization | (33) | (28) |
Net | 31 | 32 |
Patents | ||
Finite-Lived Intangible Assets [Line Items] | ||
Cost | 30 | 30 |
Accumulated Amortization | (28) | (24) |
Net | 2 | 6 |
Product development | ||
Finite-Lived Intangible Assets [Line Items] | ||
Cost | 403 | 406 |
Accumulated Amortization | (143) | (71) |
Net | 260 | 335 |
Non-compete agreements | ||
Finite-Lived Intangible Assets [Line Items] | ||
Cost | 2 | 2 |
Accumulated Amortization | (1) | (1) |
Net | $ 1 | $ 1 |
Goodwill and Other Intangible_5
Goodwill and Other Intangible Assets, Net - Amortization of Intangible Assets (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 29, 2018 | |
Finite-Lived Intangible Assets [Line Items] | |||
Amortization of intangible assets | $ 135 | $ 127 | $ 49 |
Cost of sales | |||
Finite-Lived Intangible Assets [Line Items] | |||
Amortization of intangible assets | 5 | 4 | 0 |
Selling, general and administrative | |||
Finite-Lived Intangible Assets [Line Items] | |||
Amortization of intangible assets | $ 130 | $ 123 | $ 49 |
Goodwill and Other Intangible_6
Goodwill and Other Intangible Assets, Net - Estimated Future Amortization of Intangible Assets (Details) - USD ($) $ in Millions | Dec. 31, 2020 | Dec. 31, 2019 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
2021 | $ 131 | |
2022 | 128 | |
2023 | 114 | |
2024 | 59 | |
2025 | 22 | |
Thereafter | 101 | |
Net | $ 555 | $ 643 |
Long-term Debt and Other Borr_3
Long-term Debt and Other Borrowings, Net - Schedule of Debt (Details) - USD ($) $ in Millions | Dec. 31, 2020 | Mar. 31, 2020 | Dec. 31, 2019 |
Debt Instrument [Line Items] | |||
Quarterly installment payment, amount | $ 15 | ||
Finance lease obligations | $ 1 | $ 1 | |
Total debt and other borrowings | 1,087 | 1,207 | |
Current maturities of long-term debt and other borrowings (Note 9) | (1) | (62) | |
Long-term debt and other borrowings, net (Note 9) | 1,086 | 1,145 | |
Less: unamortized debt discount | (18) | (20) | |
Long-term debt and other borrowings, net (Note 9) | 1,068 | 1,125 | |
Revolving line of credit | |||
Debt Instrument [Line Items] | |||
Long-term debt and other borrowings, net (Note 9) | $ 1,062 | ||
Notes Payable to Banks | Term loan payable; quarterly installments of $15 million began March 31, 2020 with remaining principal due at maturity | |||
Debt Instrument [Line Items] | |||
Interest rate | 2.60% | ||
Long-term debt | $ 1,080 | 1,200 | |
Quarterly installment payment, amount | $ 15 | ||
Notes Payable to Banks | Loan payable with principal due at maturity | |||
Debt Instrument [Line Items] | |||
Interest rate | 4.00% | ||
Long-term debt | $ 6 | 6 | |
Revolving line of credit | Revolving line of credit | |||
Debt Instrument [Line Items] | |||
Interest rate | 0.00% | ||
Long-term debt | $ 0 | $ 0 |
Long-term Debt and Other Borr_4
Long-term Debt and Other Borrowings, Net - Narrative (Details) | Dec. 31, 2020USD ($) | Apr. 10, 2020USD ($) | Feb. 07, 2019USD ($) | Dec. 31, 2020USD ($) | Jun. 30, 2022 | Dec. 31, 2021 | Jun. 30, 2021 | Mar. 31, 2020USD ($) | Feb. 29, 2020 | Apr. 01, 2019 |
Line of Credit Facility [Line Items] | ||||||||||
Quarterly installment payment, amount | $ 15,000,000 | |||||||||
Syndicated credit agreement 2019 | Revolving line of credit | ||||||||||
Line of Credit Facility [Line Items] | ||||||||||
Maximum borrowing capacity | $ 1,500,000,000 | $ 1,500,000,000 | $ 1,500,000,000 | |||||||
Credit agreement term | 5 years | |||||||||
Leverage ratio (less than 5.50%) | 5.50 | 5.50 | ||||||||
Syndicated credit agreement 2019 | Revolving line of credit | Forecast | ||||||||||
Line of Credit Facility [Line Items] | ||||||||||
Leverage ratio (less than 5.50%) | 3.75 | 4.50 | 5 | |||||||
Syndicated credit agreement 2019 | Revolving line of credit | Revolving line of credit | ||||||||||
Line of Credit Facility [Line Items] | ||||||||||
Maximum borrowing capacity | 300,000,000 | $ 300,000,000 | ||||||||
Unused capacity fee | 0.25% | |||||||||
Syndicated credit agreement 2019 | Revolving line of credit | Term loan | ||||||||||
Line of Credit Facility [Line Items] | ||||||||||
Quarterly amortization rate | 5.00% | |||||||||
Syndicated credit agreement 2019 | Revolving line of credit | Minimum | Revolving line of credit | ||||||||||
Line of Credit Facility [Line Items] | ||||||||||
Unused capacity fee | 0.175% | |||||||||
Syndicated credit agreement 2019 | Revolving line of credit | Maximum | Revolving line of credit | ||||||||||
Line of Credit Facility [Line Items] | ||||||||||
Unused capacity fee | 0.40% | |||||||||
Syndicated credit agreement 2019 | Revolving line of credit | LIBOR | ||||||||||
Line of Credit Facility [Line Items] | ||||||||||
Floor rate | 0.00% | |||||||||
Variable rate | 1.75% | |||||||||
Syndicated credit agreement 2019 | Revolving line of credit | LIBOR | Minimum | ||||||||||
Line of Credit Facility [Line Items] | ||||||||||
Variable rate | 1.25% | |||||||||
Syndicated credit agreement 2019 | Revolving line of credit | LIBOR | Maximum | ||||||||||
Line of Credit Facility [Line Items] | ||||||||||
Variable rate | 2.50% | |||||||||
Syndicated credit agreement 2019 | Revolving line of credit | Alternative base rate | ||||||||||
Line of Credit Facility [Line Items] | ||||||||||
Floor rate | 1.00% | |||||||||
Variable rate | 0.75% | |||||||||
Syndicated credit agreement 2019 | Revolving line of credit | Alternative base rate | Minimum | ||||||||||
Line of Credit Facility [Line Items] | ||||||||||
Variable rate | 0.25% | |||||||||
Syndicated credit agreement 2019 | Revolving line of credit | Alternative base rate | Maximum | ||||||||||
Line of Credit Facility [Line Items] | ||||||||||
Variable rate | 1.50% | |||||||||
Syndicated credit agreement 2019 | Revolving line of credit | Fed Funds Rate | ||||||||||
Line of Credit Facility [Line Items] | ||||||||||
Floor rate | 0.50% | |||||||||
Term loan payable; quarterly installments of $15 million began March 31, 2020 with remaining principal due at maturity | Notes Payable to Banks | ||||||||||
Line of Credit Facility [Line Items] | ||||||||||
Repayments of debt | 60,000,000 | $ 45,000,000 | ||||||||
Quarterly installment payment, amount | $ 15,000,000 | $ 15,000,000 |
Long-term Debt and Other Borr_5
Long-term Debt and Other Borrowings, Net - Schedule of Credit Facility (Details) - Syndicated credit agreement 2019 - Revolving line of credit - USD ($) | Dec. 31, 2020 | Feb. 07, 2019 |
Line of Credit Facility [Line Items] | ||
Maximum borrowing capacity | $ 1,500,000,000 | $ 1,500,000,000 |
Amount Available as of December 31, 2020 | 299,000,000 | |
Letter of credit, sub-limit available | 35,000,000 | |
Debt issuance costs | 28,000,000 | |
Term loan | ||
Line of Credit Facility [Line Items] | ||
Maximum borrowing capacity | 1,200,000,000 | |
Amount Available as of December 31, 2020 | 0 | |
Revolving line of credit | ||
Line of Credit Facility [Line Items] | ||
Maximum borrowing capacity | 300,000,000 | |
Amount Available as of December 31, 2020 | 299,000,000 | |
Letter of credit | ||
Line of Credit Facility [Line Items] | ||
Letters of credit outstanding | $ 1,000,000 |
Long-term Debt and Other Borr_6
Long-term Debt and Other Borrowings, Net - Schedule of Maturity of Debt Obligations (Details) - USD ($) $ in Millions | Dec. 31, 2020 | Dec. 31, 2019 |
Debt Instrument [Line Items] | ||
2021 | $ 1 | |
2022 | 60 | |
2023 | 66 | |
2024 | 960 | |
Total debt maturities | 1,087 | |
Less: current maturities | (1) | |
Less: unamortized debt issuance costs | (18) | |
Long-term debt and other borrowings, net (Note 9) | 1,068 | $ 1,125 |
Revolving line of credit | ||
Debt Instrument [Line Items] | ||
2021 | 0 | |
2022 | 60 | |
2023 | 60 | |
2024 | 960 | |
Total debt maturities | 1,080 | |
Less: current maturities | 0 | |
Less: unamortized debt issuance costs | (18) | |
Long-term debt and other borrowings, net (Note 9) | 1,062 | |
Other Debt | ||
Debt Instrument [Line Items] | ||
2021 | 1 | |
2022 | 0 | |
2023 | 6 | |
2024 | 0 | |
Total debt maturities | 7 | |
Less: current maturities | (1) | |
Less: unamortized debt issuance costs | 0 | |
Long-term debt and other borrowings, net (Note 9) | $ 6 |
Derivatives - Narrative (Detail
Derivatives - Narrative (Details) - USD ($) $ in Millions | Dec. 31, 2020 | Aug. 31, 2019 |
Derivative [Line Items] | ||
Deferral losses on cash flow hedges that are expected to be reclassified from AOCI into interest within the next 12 months | $ 5 | |
Cash Flow Hedging | Designated as Hedging Instrument | Interest rate swap contracts | ||
Derivative [Line Items] | ||
Notional amount | $ 500 | |
Minimum | Cash Flow Hedging | Designated as Hedging Instrument | Interest rate swap contracts | ||
Derivative [Line Items] | ||
Fixed interest rate | 1.63% | |
Maximum | Cash Flow Hedging | Designated as Hedging Instrument | Interest rate swap contracts | ||
Derivative [Line Items] | ||
Fixed interest rate | 1.70% |
Derivatives - Schedule of Deriv
Derivatives - Schedule of Derivative Fair Value and Balance Sheet Location (Details) - USD ($) $ in Millions | Dec. 31, 2020 | Dec. 31, 2019 |
Fair Value, Recurring | Cash Flow Hedging | Other liabilities | Interest rate swap contracts | ||
Derivative [Line Items] | ||
Interest rate swap contracts | $ 5 | $ 1 |
Derivatives - Schedule of Effec
Derivatives - Schedule of Effect of Cash Flow Hedges (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Designated as Hedging Instrument | Cash Flow Hedging | Interest rate swap contracts | Interest (income) expense | ||
Derivative [Line Items] | ||
Interest rate swap contracts | $ 5 | $ 1 |
Fair Value - Narrative and Sche
Fair Value - Narrative and Schedule Financial Instruments Measured at Fair Value on a Recurring Basis (Details) $ in Millions | Dec. 31, 2020USD ($)interestRateSwap | Apr. 30, 2020USD ($) | Dec. 31, 2019USD ($) |
Fair Value Disclosures [Abstract] | |||
Number of interest rate swap contracts | interestRateSwap | 5 | ||
Fair Value, Recurring | |||
Financial Liabilities Fair Value Disclosure [Abstract] | |||
Derivative Asset | $ 2 | $ 0 | |
Total liabilities | 6 | 1 | |
Distrivet call option (a) | Fair Value, Recurring | Level 3 | |||
Financial Liabilities Fair Value Disclosure [Abstract] | |||
Derivative Asset | 2 | $ 0 | 0 |
Interest rate swap contracts | Fair Value, Recurring | Level 2 | |||
Financial Liabilities Fair Value Disclosure [Abstract] | |||
Derivative Liability | 5 | $ 5 | 1 |
Distrivet Put Option | Fair Value, Recurring | Level 3 | |||
Financial Liabilities Fair Value Disclosure [Abstract] | |||
Derivative Liability | $ 1 | $ 0 |
Fair Value - Narrative (Details
Fair Value - Narrative (Details) $ in Millions | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2020USD ($) | Dec. 31, 2020USD ($)interestRateSwap | Dec. 31, 2019USD ($) | Dec. 29, 2018USD ($) | |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||||
Number of interest rate swap contracts | interestRateSwap | 5 | |||
Operating lease right-of-use asset impairment | $ 8 | $ 0 | $ 0 | |
Operating lease right-of-use assets, net | $ 117 | $ 84 | ||
Volatility | ||||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||||
Measurement input | 0.30 | |||
Cost of Capital | ||||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||||
Measurement input | 0.15 | |||
Fair Value, Nonrecurring | North America | Level 3 | ||||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||||
Operating lease right-of-use asset impairment | $ 8 | |||
Operating lease right-of-use assets, net | $ 8 | |||
Fair Value, Recurring | Level 3 | Distrivet Put Option | ||||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||||
Enterprise value | $ 156 |
Commitments and Contingencies_2
Commitments and Contingencies - Schedule of Unconditional Purchase Obligations (Details) - Customer Concentration Risk $ in Millions | Dec. 31, 2020USD ($) |
Loss Contingencies [Line Items] | |
2021 | $ 8 |
2022 | 8 |
2023 | 7 |
2024 | 7 |
2025 | 6 |
Total | $ 36 |
Commitments and Contingencies_3
Commitments and Contingencies - Narrative (Details) - Customer Concentration Risk - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 29, 2018 | |
Loss Contingencies [Line Items] | ||||
Payment for purchase obligations | $ 8 | $ 9 | $ 9 | |
Purchase obligation term | 3 years | |||
Fixed fee cap | 14 | |||
Variable fee cap | 39 | |||
Contract termination fees until mid-May 2020 | 10 | |||
Contract termination fees until mid-November 2020 | 12 | |||
Contract termination fees after mid-November 2020 | 14 | |||
Fixed fees incurred | $ 2 | 4 | ||
Variable fees incurred | 16 | |||
Remaining potential commitment | $ 31 |
Redeemable Non-controlling In_3
Redeemable Non-controlling Interests - Summary of Redeemable Non-controlling Interest (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 29, 2018 | |
Increase (Decrease) in Temporary Equity [Roll Forward] | |||
Balance at beginning of period | $ 10 | $ 92 | $ 368 |
Decrease due to redemptions | (4) | (74) | (383) |
Increase due to business acquisition | 24 | 0 | 6 |
Net income (loss) attributable to redeemable non-controlling interests | 2 | (3) | 6 |
Dividends paid | 0 | 0 | (10) |
Effect of foreign currency translation (gain) loss attributable to redeemable non-controlling interests | (2) | 1 | (2) |
Change to redemption value | 6 | (6) | 107 |
Balance at end of period | $ 36 | $ 10 | $ 92 |
Redeemable Series A Convertib_2
Redeemable Series A Convertible Preferred Stock (Details) $ / shares in Units, $ in Millions | May 31, 2020 | May 19, 2020USD ($)$ / sharesshares | Apr. 30, 2020USD ($) | May 31, 2020USD ($) | Dec. 31, 2020designee | Nov. 18, 2020shares | Sep. 09, 2020$ / sharesshares | Sep. 04, 2020$ / shares |
Schedule of Investments [Line Items] | ||||||||
Conversion price, percent | 200.00% | |||||||
Number of designees to board of directors | designee | 2 | |||||||
Share Sale | Series A Preferred Stock | ||||||||
Schedule of Investments [Line Items] | ||||||||
Dividend rate, percentage | 7.50% | |||||||
Proceeds from issuance of private placement, net | $ | $ 244 | $ 244 | ||||||
Investment Agreement | Share Sale | Series A Preferred Stock | CD&R VFC Holdings, L.P. | ||||||||
Schedule of Investments [Line Items] | ||||||||
Preferred stock shares issued (in shares) | shares | 250,000 | |||||||
Dividend rate, percentage | 7.50% | 7.50% | ||||||
Preferred stock par value (in dollars per share) | $ 0.01 | |||||||
Proceeds from issuance of private placement | $ | $ 250 | |||||||
Proceeds from issuance of private placement, per share | $ 1,000 | |||||||
Per share price (in actuals) (in usd per share) | $ 11.10 | |||||||
Convertible preferred stock, shares issued upon conversion | shares | 8,200,000 | 14,400,000 | ||||||
Shares reserved for future issuance | shares | 90,632 | |||||||
Investment Agreement | Share Sale | Common Stock | CD&R VFC Holdings, L.P. | ||||||||
Schedule of Investments [Line Items] | ||||||||
Per share price (in actuals) (in usd per share) | $ 22.20 | $ 22.29 |
Accumulated Other Comprehensi_3
Accumulated Other Comprehensive Income (Loss) - Schedule of Changes in Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 29, 2018 | |
AOCI Attributable to Parent, Net of Tax [Roll Forward] | |||
Common stock, shares beginning balance | $ 1,253 | $ 1,452 | $ 1,215 |
Other comprehensive income (loss) attributable to Covetrus before reclassifications | 13 | (5) | (40) |
Reclassified from Accumulated other comprehensive loss to earnings | 7 | 1 | |
Period change | 20 | (4) | (40) |
Common stock, shares ending balance | 1,537 | 1,253 | 1,452 |
Derivative Gain (Loss) | |||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | |||
Common stock, shares beginning balance | 0 | 0 | 0 |
Other comprehensive income (loss) attributable to Covetrus before reclassifications | (8) | (1) | 0 |
Reclassified from Accumulated other comprehensive loss to earnings | 5 | 1 | |
Period change | (3) | 0 | 0 |
Common stock, shares ending balance | (3) | 0 | 0 |
Gain (Loss) on Pension Adjustment | |||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | |||
Common stock, shares beginning balance | 0 | 0 | (2) |
Other comprehensive income (loss) attributable to Covetrus before reclassifications | 0 | 0 | 2 |
Reclassified from Accumulated other comprehensive loss to earnings | 0 | 0 | |
Period change | 0 | 0 | 2 |
Common stock, shares ending balance | 0 | 0 | 0 |
Foreign Currency Translation Gain (Loss) | |||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | |||
Common stock, shares beginning balance | (86) | (82) | (41) |
Other comprehensive income (loss) attributable to Covetrus before reclassifications | 21 | (4) | (41) |
Reclassified from Accumulated other comprehensive loss to earnings | 2 | 0 | |
Period change | 23 | (4) | (41) |
Common stock, shares ending balance | (63) | (86) | (82) |
Unrealized Gain (Loss) from Foreign Currency Hedging | |||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | |||
Common stock, shares beginning balance | 0 | 0 | 1 |
Other comprehensive income (loss) attributable to Covetrus before reclassifications | 0 | 0 | (1) |
Reclassified from Accumulated other comprehensive loss to earnings | 0 | 0 | |
Period change | 0 | 0 | (1) |
Common stock, shares ending balance | 0 | 0 | 0 |
Accumulated Other Comprehensive Income (Loss) | |||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | |||
Common stock, shares beginning balance | (86) | (82) | (42) |
Common stock, shares ending balance | $ (66) | $ (86) | $ (82) |
Income Taxes - Schedule of Inco
Income Taxes - Schedule of Income Before Taxes and Equity in Earnings of Affiliates (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 29, 2018 | |
Income Tax Disclosure [Abstract] | |||
Domestic | $ (164) | $ (809) | $ 59 |
Foreign | 140 | (220) | 84 |
Total income (loss) before taxes and equity in earnings of affiliates | $ (24) | $ (1,029) | $ 143 |
Income Taxes - Schedule of Prov
Income Taxes - Schedule of Provisions for Income Taxes (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 29, 2018 | |
Current income tax (benefit) expense: | |||
U.S. federal | $ 1 | $ 13 | |
State and local | 2 | 4 | |
Foreign | 22 | 25 | |
Total current income tax (benefit) expense | 25 | 42 | |
Deferred income tax (benefit) expense: | |||
U.S. federal | (25) | 0 | |
State and local | (1) | 0 | |
Foreign | (6) | (5) | |
Total deferred income tax (benefit) expense: | (32) | $ (25) | (5) |
Total income tax (benefit) expense | $ (7) | (46) | $ 37 |
Revision | |||
Deferred income tax (benefit) expense: | |||
Total income tax (benefit) expense | (39) | ||
Revision | Deferred tax calculation error | |||
Current income tax (benefit) expense: | |||
U.S. federal | 0 | ||
State and local | 2 | ||
Foreign | 16 | ||
Total current income tax (benefit) expense | 18 | ||
Deferred income tax (benefit) expense: | |||
U.S. federal | (46) | ||
State and local | (10) | ||
Foreign | (8) | ||
Total deferred income tax (benefit) expense: | (64) | ||
Total income tax (benefit) expense | $ (46) |
Income Taxes - Schedule of Defe
Income Taxes - Schedule of Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Millions | Dec. 31, 2020 | Dec. 31, 2019 |
Deferred income tax assets: | ||
Investment in partnerships | $ 0 | |
Net operating losses and other carryforwards | 41 | |
Share-based compensation | 6 | |
Lease asset | 20 | |
Other assets | 17 | |
Total deferred income tax assets | 84 | |
Valuation allowance for deferred tax assets | (11) | |
Net deferred income tax assets | 73 | |
Deferred income tax liabilities: | ||
Intangibles amortization | (74) | |
Other liabilities | (18) | |
Total deferred income tax liabilities | (92) | |
Net deferred income tax assets (liabilities) | $ (19) | |
Revision | Deferred tax calculation error | ||
Deferred income tax assets: | ||
Investment in partnerships | $ 54 | |
Net operating losses and other carryforwards | 38 | |
Share-based compensation | 7 | |
Lease asset | 6 | |
Other assets | 6 | |
Total deferred income tax assets | 111 | |
Valuation allowance for deferred tax assets | (10) | |
Net deferred income tax assets | 101 | |
Deferred income tax liabilities: | ||
Intangibles amortization | (125) | |
Other liabilities | (6) | |
Total deferred income tax liabilities | (131) | |
Net deferred income tax assets (liabilities) | $ (30) |
Income Taxes - Classification o
Income Taxes - Classification of Deferred Income Tax Assets (Liabilities) (Details) - USD ($) $ in Millions | Dec. 31, 2020 | Dec. 31, 2019 |
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||
Non-current deferred income tax assets, net | $ 9 | |
Non-current deferred income tax liabilities, net | (28) | $ (48) |
Net deferred income tax assets (liabilities) | $ (19) | |
Revision | ||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||
Non-current deferred income tax liabilities, net | (1) | |
Revision | Deferred tax calculation error | ||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | ||
Non-current deferred income tax assets, net | 18 | |
Non-current deferred income tax liabilities, net | (48) | |
Net deferred income tax assets (liabilities) | $ (30) |
Income Taxes - Narrative (Detai
Income Taxes - Narrative (Details) $ in Millions | 12 Months Ended | |||
Dec. 31, 2020USD ($)jurisdiction | Dec. 31, 2019USD ($) | Dec. 29, 2018USD ($) | Dec. 30, 2017USD ($) | |
Operating Loss Carryforwards [Line Items] | ||||
Valuation allowance for deferred tax assets | $ 11 | |||
Valuation allowance, period change | 1 | |||
Total shareholders’ equity | $ 1,537 | $ 1,253 | $ 1,452 | $ 1,215 |
Number of foreign jurisdictions | jurisdiction | 25 | |||
Current tax expense for GILTI interest limitation | $ 2 | |||
Current tax expense for GILTI provision | $ 10 | 10 | ||
One-time transition tax | 4 | |||
Effective tax rate with without transition, revaluation and ASU adoption changes | 13500000000.00% | |||
Additional tax expense | $ 2 | |||
Unrecognized tax benefits that would impact effective tax rate | 3 | |||
Decrease reasonably possible | 0.3 | |||
Accrued interest and penalties | 0.1 | 2 | ||
Net Former Parent Investment | ||||
Operating Loss Carryforwards [Line Items] | ||||
Total shareholders’ equity | $ 0 | 0 | 1,534 | 1,257 |
Revision | ||||
Operating Loss Carryforwards [Line Items] | ||||
Total shareholders’ equity | $ (3) | (42) | ||
Revision | Net Former Parent Investment | ||||
Operating Loss Carryforwards [Line Items] | ||||
Total shareholders’ equity | $ (42) | $ 42 |
Income Taxes - Schedule of Corr
Income Taxes - Schedule of Corrections (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 12 Months Ended | |||||||||||
Dec. 31, 2020 | Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 29, 2018 | Dec. 30, 2017 | ||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | |||||||||||||
Total shareholders’ equity | $ 1,537 | $ 1,253 | $ 1,537 | $ 1,253 | $ 1,452 | $ 1,215 | |||||||
Total assets | 3,496 | 3,359 | 3,496 | 3,359 | 2,192 | ||||||||
Deferred income taxes | 28 | 48 | 28 | 48 | |||||||||
Total liabilities | 1,923 | 2,096 | 1,923 | 2,096 | |||||||||
Additional paid-in capital | 2,629 | 2,339 | 2,629 | 2,339 | |||||||||
Accumulated deficit | (1,027) | (1,001) | (1,027) | (1,001) | |||||||||
Total liabilities, redeemable non-controlling interests, and shareholders’ equity | 3,496 | 3,359 | 3,496 | 3,359 | |||||||||
Income tax benefit (expense) | 7 | 46 | (37) | ||||||||||
Net income (loss) | (17) | (983) | 107 | ||||||||||
Net income (loss) attributable to Covetrus | $ (4) | $ (35) | $ 54 | $ (33) | $ (37) | $ (920) | $ (10) | $ (13) | $ (19) | $ (980) | [1] | $ 101 | |
Basic (in usd per share) | $ (0.04) | $ (0.33) | $ 0.40 | $ (0.30) | $ (0.33) | $ (8.22) | $ (0.09) | $ (0.14) | $ (0.22) | $ (9.14) | $ 1.41 | ||
Diluted (in usd per share) | $ (0.04) | $ (0.33) | $ 0.40 | $ (0.30) | $ (0.33) | $ (8.22) | $ (0.09) | $ (0.14) | $ (0.22) | $ (9.14) | $ 1.40 | ||
Investments and Other | |||||||||||||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | |||||||||||||
Non-current deferred income tax assets, net | $ 18 | $ 18 | |||||||||||
Net Former Parent Investment | |||||||||||||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | |||||||||||||
Total shareholders’ equity | $ 0 | 0 | $ 0 | 0 | $ 1,534 | 1,257 | |||||||
Net income (loss) attributable to Covetrus | $ 0 | 21 | [1] | 101 | |||||||||
Previously Reported | |||||||||||||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | |||||||||||||
Total shareholders’ equity | 1,256 | 1,256 | 1,494 | ||||||||||
Total assets | 3,361 | 3,361 | |||||||||||
Deferred income taxes | 47 | 47 | |||||||||||
Total liabilities | 2,095 | 2,095 | |||||||||||
Additional paid-in capital | 2,381 | 2,381 | |||||||||||
Accumulated deficit | (1,040) | (1,040) | |||||||||||
Total liabilities, redeemable non-controlling interests, and shareholders’ equity | 3,361 | 3,361 | |||||||||||
Income tax benefit (expense) | 7 | ||||||||||||
Net income (loss) | (1,022) | ||||||||||||
Net income (loss) attributable to Covetrus | $ (1,019) | ||||||||||||
Basic (in usd per share) | $ (9.50) | ||||||||||||
Diluted (in usd per share) | $ (9.50) | ||||||||||||
Previously Reported | Investments and Other | |||||||||||||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | |||||||||||||
Non-current deferred income tax assets, net | 20 | $ 20 | |||||||||||
Previously Reported | Net Former Parent Investment | |||||||||||||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | |||||||||||||
Total shareholders’ equity | 1,576 | ||||||||||||
Revision | |||||||||||||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | |||||||||||||
Total shareholders’ equity | (3) | (3) | (42) | ||||||||||
Total assets | (2) | (2) | |||||||||||
Deferred income taxes | 1 | 1 | |||||||||||
Total liabilities | 1 | 1 | |||||||||||
Additional paid-in capital | (42) | (42) | |||||||||||
Accumulated deficit | 39 | 39 | |||||||||||
Total liabilities, redeemable non-controlling interests, and shareholders’ equity | (2) | (2) | |||||||||||
Income tax benefit (expense) | 39 | ||||||||||||
Net income (loss) | 39 | ||||||||||||
Net income (loss) attributable to Covetrus | $ 39 | ||||||||||||
Basic (in usd per share) | $ 0.36 | ||||||||||||
Diluted (in usd per share) | $ 0.36 | ||||||||||||
Revision | Investments and Other | |||||||||||||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | |||||||||||||
Non-current deferred income tax assets, net | $ (2) | $ (2) | |||||||||||
Revision | Net Former Parent Investment | |||||||||||||
Error Corrections and Prior Period Adjustments Restatement [Line Items] | |||||||||||||
Total shareholders’ equity | $ (42) | $ 42 | |||||||||||
[1] | (a) Net income earned from January 1, 2019 through February 7, 2019 is attributed to the Former Parent as it was the sole shareholder prior to February 7, 2019 |
Income Taxes - Schedule of Tax
Income Taxes - Schedule of Tax Loss and Tax Credit Carryforwards (Details) $ in Millions | Dec. 31, 2020USD ($) |
Operating Loss Carryforwards [Line Items] | |
Total tax loss and tax credit carryforwards | $ 41 |
U.S. Federal | |
Operating Loss Carryforwards [Line Items] | |
Loss carryforwards | 20 |
Credit and deduction carryforwards | 2 |
U.S. Federal and State | |
Operating Loss Carryforwards [Line Items] | |
Credit and deduction carryforwards | 8 |
U.S. State | |
Operating Loss Carryforwards [Line Items] | |
Loss carryforwards | 4 |
Non-U.S. | |
Operating Loss Carryforwards [Line Items] | |
Loss carryforwards | $ 7 |
Income Taxes - Schedule of Effe
Income Taxes - Schedule of Effective Income Tax Rate Reconciliation (Details) | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 29, 2018 | |
Income Tax Disclosure [Abstract] | |||
Income tax provision at federal statutory rate | 21.00% | 21.00% | 21.00% |
Transition tax on deemed repatriation of foreign earnings | 0 | 0 | 0.028 |
Pass through non-controlling interest | 0.00% | 0.00% | (2.10%) |
State income tax provision, net of federal income tax effect | (3.70%) | 0.90% | 1.40% |
Foreign income tax (benefit) provision | 15.70% | 0.30% | 1.40% |
Tax on GILTI | (42.60%) | (0.90%) | 1.40% |
Excess tax benefits related to share-based compensation | (28.40%) | (0.50%) | (0.70%) |
Revaluation of deferred tax assets and liabilities | 0 | (0.009) | 0 |
Valuation allowance impacts | (2.20%) | (0.50%) | 0.00% |
Goodwill impairment | 0.00% | (14.40%) | 0.00% |
Non-deductible expenses | (29.30%) | (0.60%) | 0.00% |
Reverse Book Gain/(Loss) on Foreign Sales | 69.20% | 0.30% | 0.00% |
Return to Provision | 12.10% | 0.00% | 0.00% |
Impact of Partnership Inside/Outside Basis Conversion | 7.50% | 0.00% | 0.00% |
Impact of Uncertain Tax Positions | 2.20% | 0.10% | 0.00% |
Credits | 6.60% | 0.00% | 0.00% |
Other | 0.80% | (0.30%) | 0.70% |
Effective tax rate | 28.90% | 4.50% | 25.90% |
Income Taxes - Schedule of Reco
Income Taxes - Schedule of Reconciliation of Unrecognized Tax Benefits (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 29, 2018 | |
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward] | |||
Balance at beginning of period | $ 4 | $ 6 | $ 8 |
Decrease based on prior year tax positions | (1) | ||
Additions based on prior year tax positions | 0 | 2 | |
Reductions from lapse in statutes of limitations | 0 | (2) | (4) |
Balance at end of period | $ 3 | $ 4 | $ 6 |
Earnings (Loss) Per Share - Nar
Earnings (Loss) Per Share - Narrative (Details) - shares shares in Millions | May 31, 2020 | May 19, 2020 | Feb. 07, 2019 | Feb. 06, 2019 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 29, 2018 |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||||||
Diluted common share equivalents for restricted stock (in shares) | 1 | 0 | 0 | 1 | |||
Series A Preferred Stock | Share Sale | |||||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||||||
Dividend rate, percentage | 7.50% | ||||||
CD&R VFC Holdings, L.P. | Series A Preferred Stock | Share Sale | Investment Agreement | |||||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||||||
Dividend rate, percentage | 7.50% | 7.50% | |||||
Henry Schein | |||||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | |||||||
Shares distributed to stockholders (in shares) | 71 |
Earnings (Loss) Per Share - Rec
Earnings (Loss) Per Share - Reconciliation of Basic Shares to Diluted Shares (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 1 Months Ended | 3 Months Ended | 12 Months Ended | ||||||||||
Feb. 06, 2019 | Dec. 31, 2020 | Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 29, 2018 | ||
Numerator: | |||||||||||||
Net income (loss) attributable to Covetrus | $ (4) | $ (35) | $ 54 | $ (33) | $ (37) | $ (920) | $ (10) | $ (13) | $ (19) | $ (980) | [1] | $ 101 | |
Adjustment for: Dividends declared on Series A preferred stock | (7) | 0 | 0 | ||||||||||
Income (loss) available to common shareholders | $ (26) | $ (980) | $ 101 | ||||||||||
Denominator: | |||||||||||||
Basic, Weighted-average common shares outstanding | 118 | 107 | 71 | ||||||||||
Diluted, Effect of dilutive shares (in shares) | 1 | 0 | 0 | 1 | |||||||||
Diluted shares (in shares) | 118 | 107 | 72 | ||||||||||
Earnings (loss) per share attributable to Covetrus: | |||||||||||||
Basic (in usd per share) | $ (0.04) | $ (0.33) | $ 0.40 | $ (0.30) | $ (0.33) | $ (8.22) | $ (0.09) | $ (0.14) | $ (0.22) | $ (9.14) | $ 1.41 | ||
Diluted (in usd per share) | $ (0.04) | $ (0.33) | $ 0.40 | $ (0.30) | $ (0.33) | $ (8.22) | $ (0.09) | $ (0.14) | $ (0.22) | $ (9.14) | $ 1.40 | ||
Potentially dilutive securities | 6 | 6 | 0 | ||||||||||
[1] | (a) Net income earned from January 1, 2019 through February 7, 2019 is attributed to the Former Parent as it was the sole shareholder prior to February 7, 2019 |
Share-based Compensation and _3
Share-based Compensation and Other Employee Benefits - Narrative (Details) - USD ($) $ in Millions | Feb. 07, 2019 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 29, 2018 |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Restricted stock granted (in shares) | 327,447 | |||
Options granted (in shares) | 3,914,694 | 0 | 0 | |
Plus: Share-based compensation | $ 40 | $ 46 | $ 7 | |
Share-based compensation expense, after tax | 32 | 40 | 6 | |
Proceeds from option exercises | 7 | 4 | ||
Unrecognized compensation cost | 50 | |||
AIP compensation expense | 16 | 7 | ||
Matching contribution expense | $ 11 | $ 9 | $ 6 | |
2019 Omnibus Incentive Compensation Plan | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Expiration period | 10 years | |||
Vesting period | 3 years | |||
Shares authorized (in shares) | 16,000,000 | |||
Option | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Weighted-average period of recognition | 1 year 9 months 18 days | |||
Employee Stock | Employee Stock Purchase Plan | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Approved for future issuance (in shares) | 2,000,000 | |||
Maximum percent of base pay | 15.00% | |||
Purchase price of common stock | 85.00% | |||
Performance stock units (PSUs) | Certain Individuals | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Performance cycles (in years) | 1 year | |||
Vesting period | 1 year | |||
Performance stock units (PSUs) | Senior management | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Performance cycles (in years) | 1 year | |||
Vesting period | 3 years |
Share-based Compensation and _4
Share-based Compensation and Other Employee Benefits - Summary of Stock Option Activity (Details) - USD ($) $ / shares in Units, $ in Millions | Feb. 07, 2019 | Dec. 31, 2020 | Dec. 29, 2018 |
Number of Shares | |||
Outstanding at beginning of year (in shares) | 4,000,000 | ||
Granted (in shares) | 3,914,694 | 0 | 0 |
Exercised (in shares) | (1,000,000) | ||
Forfeited (in shares) | (1,000,000) | ||
Outstanding at end of year (in shares) | 2,000,000 | ||
Exercisable at end of year (in shares) | 1,000,000 | ||
Weighted- average Exercise Price Per Share | |||
Outstanding at beginning of year (in usd per share) | $ 15.29 | ||
Granted (in usd per share) | 0 | ||
Exercised (in usd per share) | 6.80 | ||
Forfeited (in usd per share) | 28.59 | ||
Outstanding at end of year (in usd per share) | 15.58 | ||
Exercisable at end of year (in usd per share) | $ 11.99 | ||
Stock Option Activity, Additional Disclosures | |||
Outstanding at end of year, Weighted Average Remaining Contractual Life (in years) | 6 years 10 months 24 days | ||
Exercisable at end of year, Weighted Average Remaining Contractual Life (in years) | 6 years 7 months 6 days | ||
Outstanding at end of year, Aggregate Intrinsic Value | $ 31 | ||
Exercisable at end of year, Aggregate Intrinsic Value | $ 24 |
Share-based Compensation and _5
Share-based Compensation and Other Employee Benefits - Schedule of Weighted-average Grant-date Fair Value and related Valuation Assumptions (Details) | 12 Months Ended |
Dec. 31, 2019$ / shares | |
Share-based Payment Arrangement [Abstract] | |
Weighted-average grant-date fair value (in use per share) | $ 12.19 |
Valuation assumption ranges: | |
Expected term (years) | 6 years |
Risk free interest rate, minimum | 1.80% |
Risk free interest rate, maximum | 2.50% |
Expected volatility rate, minimum | 29.60% |
Expected volatility rate, maximum | 30.00% |
Share-based Compensation and _6
Share-based Compensation and Other Employee Benefits - Schedule of Summary of RSA/RSU Activity (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 29, 2018 | |
Weighted-average Grant-date Fair Value Per Share | |||
Granted (in usd per share) | $ 11.51 | $ 27.83 | $ 65.26 |
Restricted Stock Awards and Restricted Stock Units | |||
Number of Shares | |||
Nonvested at beginning of year (in shares) | 2 | ||
Granted (in shares) | 3 | ||
Vested (in shares) | (1) | ||
Forfeited (in shares) | 0 | ||
Nonvested at end of year (in shares) | 4 | 2 | |
Weighted-average Grant-date Fair Value Per Share | |||
Nonvested at beginning of year (in usd per share) | $ 25.69 | ||
Granted (in usd per share) | 11.51 | ||
Vested (in usd per share) | 28.24 | ||
Forfeited (in usd per share) | 19.37 | ||
Nonvested at end of year (in usd per share) | $ 14.07 | $ 25.69 | |
Weighted-average Remaining Contractual Life (Years) | 1 year 3 months | ||
Aggregate Intrinsic Value | $ 124 |
Share-based Compensation and _7
Share-based Compensation and Other Employee Benefits - Weighted-average Grant-date Fair Value of RSA/RSU Awards (Details) - $ / shares | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 29, 2018 | |
Share-based Payment Arrangement [Abstract] | |||
Weighted-average grant-date fair value (in usd per share) | $ 11.51 | $ 27.83 | $ 65.26 |
Share-based Compensation and _8
Share-based Compensation and Other Employee Benefits - Additional Information for Share-based Awards (Details) - Restricted Stock Awards and Restricted Stock Units - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 29, 2018 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Intrinsic value of stock options exercised | $ 13 | $ 15 | $ 0 |
Fair value of RSA/RSU shares vested | $ 6 | $ 3 | $ 2 |
Related-party Transactions (Det
Related-party Transactions (Details) shares in Millions, $ in Millions | 12 Months Ended | |||
Dec. 31, 2020memberdesignee | Dec. 31, 2019USD ($)member | Dec. 29, 2018USD ($) | May 19, 2020shares | |
Related Party Transaction [Line Items] | ||||
Allocated general corporate expenses | $ | $ 5 | $ 55 | ||
Right to Designation Advisor Board Member, Beneficial Ownership, Number of Designations | designee | 2 | |||
Number of Board of Directors Members | member | 10 | 9 | ||
CD&R VFC Holdings, L.P. | CD&R VFC Holdings, L.P. | ||||
Related Party Transaction [Line Items] | ||||
Percentage ownership, noncontrolling interest | 24.80% | |||
Right to Designation Advisor Board Member, Beneficial Ownership Minimum Threshold | 50.00% | |||
Right to Designation Advisor Board Member, Beneficial Ownership Minimum Threshold, Shares | 16.8 | |||
Right to Designation Investor Board Member, Beneficial Ownership Minimum Threshold, Percent | 25.00% | |||
Right to Designation Investor Board Member, Beneficial Ownership Minimum Threshold, Shares | 8.4 |
Segment Data - Operating Result
Segment Data - Operating Results by Segment (Details) $ in Millions | 3 Months Ended | 12 Months Ended | ||||||||||
Dec. 31, 2020USD ($) | Sep. 30, 2020USD ($) | Jun. 30, 2020USD ($) | Mar. 31, 2020USD ($) | Dec. 31, 2019USD ($) | Sep. 30, 2019USD ($) | Jun. 30, 2019USD ($) | Mar. 31, 2019USD ($) | Dec. 31, 2020USD ($)softwarePlatform | Dec. 31, 2019USD ($) | Dec. 29, 2018USD ($) | ||
Segment Reporting Information [Line Items] | ||||||||||||
Number of multi-channel veterinary software platform | softwarePlatform | 1 | |||||||||||
Net sales | $ 1,121 | $ 1,126 | $ 1,026 | $ 1,065 | $ 1,008 | $ 1,018 | $ 1,009 | $ 941 | $ 4,339 | $ 3,976 | $ 3,778 | |
Adjusted EBITDA | 226 | 200 | 219 | |||||||||
Depreciation and amortization | 166 | 155 | 64 | |||||||||
Income tax benefit (expense) | (7) | (46) | 37 | |||||||||
Total assets | 3,496 | 3,359 | 3,496 | 3,359 | 2,192 | |||||||
Expenditures for long-lived assets | 58 | 39 | 22 | |||||||||
Net income (loss) attributable to Covetrus | (4) | (35) | 54 | (33) | (37) | (920) | (10) | (13) | (19) | (980) | [1] | 101 |
Plus: Depreciation and amortization | 166 | 155 | 64 | |||||||||
Plus: Interest expense, net | 47 | 53 | 2 | |||||||||
Earnings (loss) before interest, taxes, depreciation, and amortization | 187 | (818) | 204 | |||||||||
Plus: Share-based compensation | 40 | 46 | 7 | |||||||||
Plus: Strategic consulting | 20 | 2 | ||||||||||
Plus: Transactions costs | 8 | 2 | ||||||||||
Plus: Separation programs and executive severance | 11 | 11 | 9 | |||||||||
Plus: Formation of Covetrus | 19 | 31 | ||||||||||
Plus: Capital structure | 2 | |||||||||||
Plus: Carve-out operating expenses | 5 | |||||||||||
Plus: IT infrastructure | 4 | 6 | ||||||||||
Plus: Goodwill impairment | 0 | $ 0 | $ 0 | $ 0 | (1) | $ 939 | $ 0 | $ 0 | 0 | 938 | 0 | |
Goodwill, Impairment Loss Attributable to Noncontrolling Interest | (4) | |||||||||||
Plus: Equity method investments and non-consolidated affiliates | 2 | (1) | ||||||||||
Operating lease right-of-use asset impairment | 8 | 0 | 0 | |||||||||
Plus: France managed exit | 7 | 0 | 0 | |||||||||
Less: Other items, net | (82) | (19) | ||||||||||
Adjusted EBITDA | 226 | 200 | 219 | |||||||||
Government grant income | 1 | |||||||||||
Gain on legacy investment | 2 | |||||||||||
Frances and Romania | ||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||
Acquisition gains | 15 | |||||||||||
Facility Closing | ||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||
Severance benefits | 6 | 6 | ||||||||||
Inventory write-down | 1 | |||||||||||
Held-for-sale | scil | ||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||
Pre-tax gain on divestiture | 73 | |||||||||||
Foreign exchange adjustment | 1 | |||||||||||
Put and Call Option | ||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||
Less: Other items, net | (6) | |||||||||||
North America | ||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||
Net sales | 2,377 | 2,111 | 1,939 | |||||||||
Plus: Goodwill impairment | 653 | |||||||||||
Europe | ||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||
Net sales | 1,571 | 1,509 | 1,463 | |||||||||
Plus: Goodwill impairment | 221 | |||||||||||
APAC & Emerging Markets | ||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||
Net sales | 402 | 368 | 387 | |||||||||
Plus: Goodwill impairment | 64 | |||||||||||
Operating Segments | North America | ||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||
Net sales | 2,377 | 2,111 | 1,939 | |||||||||
Adjusted EBITDA | 187 | 153 | 157 | |||||||||
Depreciation and amortization | 144 | 131 | 41 | |||||||||
Income tax benefit (expense) | (19) | (47) | 18 | |||||||||
Total assets | 3,077 | 2,939 | 3,077 | 2,939 | 1,302 | |||||||
Expenditures for long-lived assets | 41 | 23 | 14 | |||||||||
Adjusted EBITDA | 187 | 153 | 157 | |||||||||
Operating Segments | Europe | ||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||
Net sales | 1,571 | 1,509 | 1,463 | |||||||||
Adjusted EBITDA | 72 | 68 | 75 | |||||||||
Depreciation and amortization | 17 | 18 | 17 | |||||||||
Income tax benefit (expense) | 11 | 3 | 15 | |||||||||
Total assets | 713 | 726 | 713 | 726 | 702 | |||||||
Expenditures for long-lived assets | 11 | 10 | 7 | |||||||||
Adjusted EBITDA | 72 | 68 | 75 | |||||||||
Operating Segments | APAC & Emerging Markets | ||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||
Net sales | 402 | 368 | 387 | |||||||||
Adjusted EBITDA | 28 | 18 | 19 | |||||||||
Depreciation and amortization | 5 | 6 | 6 | |||||||||
Income tax benefit (expense) | 6 | 4 | 3 | |||||||||
Total assets | 188 | 137 | 188 | 137 | 182 | |||||||
Expenditures for long-lived assets | 3 | 1 | 1 | |||||||||
Adjusted EBITDA | 28 | 18 | 19 | |||||||||
Corporate | ||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||
Net sales | 0 | 0 | 0 | |||||||||
Adjusted EBITDA | (61) | (39) | (32) | |||||||||
Depreciation and amortization | 0 | 0 | 0 | |||||||||
Income tax benefit (expense) | (5) | (6) | 1 | |||||||||
Total assets | 1,415 | 783 | 1,415 | 783 | 10 | |||||||
Expenditures for long-lived assets | 3 | 5 | 0 | |||||||||
Adjusted EBITDA | (61) | (39) | (32) | |||||||||
Eliminations | ||||||||||||
Segment Reporting Information [Line Items] | ||||||||||||
Net sales | (11) | (12) | (11) | |||||||||
Adjusted EBITDA | 0 | 0 | 0 | |||||||||
Depreciation and amortization | 0 | 0 | 0 | |||||||||
Income tax benefit (expense) | 0 | 0 | 0 | |||||||||
Total assets | $ (1,897) | $ (1,226) | (1,897) | (1,226) | (4) | |||||||
Expenditures for long-lived assets | 0 | 0 | 0 | |||||||||
Adjusted EBITDA | $ 0 | $ 0 | $ 0 | |||||||||
[1] | (a) Net income earned from January 1, 2019 through February 7, 2019 is attributed to the Former Parent as it was the sole shareholder prior to February 7, 2019 |
Summary of Quarterly Data (Un_3
Summary of Quarterly Data (Unaudited) (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 12 Months Ended | ||||||||||
Dec. 31, 2020 | Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 29, 2018 | ||
Quarterly Financial Information Disclosure [Abstract] | ||||||||||||
Net sales | $ 1,121 | $ 1,126 | $ 1,026 | $ 1,065 | $ 1,008 | $ 1,018 | $ 1,009 | $ 941 | $ 4,339 | $ 3,976 | $ 3,778 | |
Gross profit | 206 | 197 | 192 | 202 | 188 | 191 | 193 | 177 | 798 | 749 | 684 | |
Goodwill impairment | 0 | 0 | 0 | 0 | (1) | 939 | 0 | 0 | 0 | 938 | 0 | |
Operating (loss) income | (19) | (27) | (4) | (20) | (25) | (958) | (5) | (9) | (69) | (997) | 137 | |
Net income (loss) attributable to Covetrus | $ (4) | $ (35) | $ 54 | $ (33) | $ (37) | $ (920) | $ (10) | $ (13) | $ (19) | $ (980) | [1] | $ 101 |
Earnings (loss) per share: | ||||||||||||
Basic (in usd per share) | $ (0.04) | $ (0.33) | $ 0.40 | $ (0.30) | $ (0.33) | $ (8.22) | $ (0.09) | $ (0.14) | $ (0.22) | $ (9.14) | $ 1.41 | |
Diluted (in usd per share) | $ (0.04) | $ (0.33) | $ 0.40 | $ (0.30) | $ (0.33) | $ (8.22) | $ (0.09) | $ (0.14) | $ (0.22) | $ (9.14) | $ 1.40 | |
[1] | (a) Net income earned from January 1, 2019 through February 7, 2019 is attributed to the Former Parent as it was the sole shareholder prior to February 7, 2019 |