Income Taxes (Tables)

12 Months Ended

Dec. 31, 2019

Schedule of Income Before Taxes and Equity in Earnings of Affiliates

(Loss) income before taxes and equity in earnings of affiliates were as follows:



	Years Ended
	December 31, 2019			December 29, 2018		December 30, 2017
Domestic	$	(809	)	$	59	$	69
Foreign	(220		)	84		70
Total (loss) income before taxes and equity in earnings of affiliates	$	(1,029	)	$	143	$	139

Schedule of Provisions for Income Taxes

The provisions for income taxes were as follows:



	Years Ended
	December 31, 2019			December 29, 2018			December 30, 2017
Current income tax (benefit) expense:
U.S. federal	$	—		$	13		$	22
State and local	2			4			4
Foreign	16			25			16
Total current	18			42			42
Deferred income tax (benefit) expense:
U.S. federal	(10		)	—			7
State and local	(7		)	—			—
Foreign	(8		)	(5		)	(1		)
Total deferred	(25		)	(5		)	6
Total income tax (benefit) expense	$	(7	)	$	37		$	48

Schedule of Deferred Tax Assets and Liabilities

Significant components of our deferred tax assets and liabilities were as follows:



	Years Ended
	December 31, 2019			December 29, 2018
Deferred income tax assets:
Investment in partnerships	$	96		$	72
Net operating losses and other carryforwards	38			3
Inventory, premium coupon redemptions, and accounts receivable valuation allowances	—			1
Share-based compensation	7			—
Other assets	12			1
Total deferred income tax assets	153			77
Valuation allowance for deferred tax assets	(49		)	(1		)
Net deferred income tax assets	104			76
Deferred income tax liabilities:
Intangibles amortization	(125		)	(20		)
Other liabilities	(6		)	—
Total deferred income tax liabilities	(131		)	(20		)
Net deferred income tax (liabilities) assets	$	(27	)	$	56

The deferred income tax assets (liabilities) are classified in the consolidated and combined balance sheets as follows:



	December 31, 2019			December 29, 2018
Non-current deferred income tax assets, net ^(a)	$	20		$	72
Non-current deferred income tax liabilities, net	(47		)	(16		)
Non-current deferred income tax (liabilities) assets	$	(27	)	$	56
(a) Included in Investments and other

Schedule of Corrections

We revised our consolidated financial statements for our quarter ended September 30, 2019, see Note 1 - Business Overview and Significant Accounting Policies. We determined that these amounts are not material to our previously issued quarterly financial statements. The impact to our previously issued consolidated financial statements was as follows:



	As of September 30, 2019
Consolidated Balance Sheet:	Previously Reported			Revision			As Revised
Non-current deferred income tax assets, net^(a)	$	38		$	(19	)	$	19
Total assets	3,328			(19		)	3,309
Deferred income taxes	11			34			45
Total liabilities	1,989			34			2,023
Accumulated deficit	(939		)	(53		)	(992		)
Total shareholders’ equity	1,329			(53		)	1,276
Total liabilities, redeemable non-controlling interests, and shareholders’ equity	$	3,328		$	(19	)	$	3,309

(a) Included in Investments and other
	Quarter Ended September 30, 2019
Consolidated Statement of Operations:	Previously Reported			Revision			As Revised
Income tax benefit (expense)	$	60		$	(53	)	$	7
Net (loss) income	$	(909	)	$	(53	)	$	(962	)
Net (loss) income attributable to Covetrus	$	(906	)	$	(53	)	$	(959	)
(Loss) earnings per share attributable to Covetrus:
Basic	$	(8.09	)	$	(0.47	)	$	(8.56	)
Diluted	$	(8.09	)	$	(0.47	)	$	(8.56	)

Schedule of Tax Loss Carryforwards

At December 31, 2019, 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	$	21	2023 - unlimited
U.S. federal and state interest carryforwards	$	8	unlimited
U.S. state tax loss carryforwards	$	5	2020 - 2039
Non-U.S. tax loss carryforwards	$	4	2020 - unlimited
Total tax loss and tax credit carryforwards	$	38

Summary of Tax Credit Carryforwards

At December 31, 2019, 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	$	21	2023 - unlimited
U.S. federal and state interest carryforwards	$	8	unlimited
U.S. state tax loss carryforwards	$	5	2020 - 2039
Non-U.S. tax loss carryforwards	$	4	2020 - unlimited
Total tax loss and tax credit carryforwards	$	38

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, 2019		December 29, 2018		December 30, 2017
Income tax provision at federal statutory rate	21.0	%	21.0	%	35.0	%
Transition tax on deemed repatriation of foreign earnings	—		2.8		9.4
Pass through non-controlling interest	—		(2.1	)	(7.9	)
State income tax provision, net of federal income tax effect	0.5		1.4		2.0
Foreign income tax provision (benefit)	0.3		1.4		(6.2	)
Tax on GILTI	(0.9	)	1.4		—
Excess tax benefits related to share-based compensation	—		(0.7	)	(2.9	)
Revaluation of deferred tax assets and liabilities	(0.9	)	—		5.3
Valuation allowance impacts	(3.9	)	—		—
Goodwill impairment	(14.4	)	—		—
Other	(1.0	)	0.7		(0.1	)
Total income tax provision	0.7	%	25.9	%	34.6	%

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, 2019			December 29, 2018			December 30, 2017
Balance at beginning of period	$	6		$	8		$	8
Additions based on prior year tax positions	—			2			1
Reductions from lapse in statutes of limitations	(2		)	(4		)	(1		)
Balance at end of period	$	4		$	6		$	8