Segment Data

3 Months Ended

Mar. 31, 2022

Segment Reporting [Abstract]

Segment Data

2. SEGMENT DATA

We are organized based upon geographic region and focus on delivering our platform of products and services to our customers on a geographical basis which reflect how the CODM reviews financial information and makes operating decisions. Our three reportable segments are (i) North America, (ii) Europe, and (iii) APAC & Emerging Markets. Our major product groups that we disaggregate within our reportable segments are (i) supply chain services, (ii) prescription management, and (iii) software services. See Note 3 - Revenue from Contracts with Customers for our third-party, net revenue disaggregated by major product category and reportable segment. 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 table reflects net sales based on geographic location:

(In millions)	Three Months Ended
Net Sales	March 31, 2022		March 31, 2021
North America	$	696	$	635
Europe	344		361
APAC & Emerging Markets	112		112
Eliminations	(4)		(6)
Total net sales	$	1,148	$	1,102

The following tables reflect adjusted EBITDA by geographic location and a reconciliation of Net Income (Loss) Attributable to Covetrus to Non-GAAP Adjusted EBITDA:

(In millions)	Three Months Ended
Adjusted EBITDA	March 31, 2022		March 31, 2021
North America	$	57	$	52
Europe	18		21
APAC & Emerging Markets	10		10
Corporate	(22)		(26)
Eliminations	—		—
Total Adjusted EBITDA	$	63	$	57

	Three Months Ended
(In millions)	March 31, 2022		March 31, 2021
Reconciliation of Net Income (Loss) Attributable to Covetrus to Non-GAAP Adjusted EBITDA
Net income (loss) attributable to Covetrus	$	(2)	$	(16)
Plus: Depreciation and amortization	40		43
Plus: Interest expense, net	7		9
Less: Income tax (benefit) expense	3		4
Earnings (loss) before interest, taxes, depreciation, and amortization	48		40
Plus: Share-based compensation	13		11
Plus: Strategic consulting	—		2
Plus: Transaction costs	1		1
Plus: Formation of Covetrus	—		2
Plus: Equity method investments and non-consolidated affiliates	1		1
Plus: Other impairments	—		1
Plus: Other items, net	—		(1)
Non-GAAP Adjusted EBITDA	$	63	$	57

Below is a listing of adjustments to EBITDA included in the reconciliation above:

Share-based compensation - Share-based compensation is a non-cash expense.

Strategic consulting - Related to third-party consulting services. Included within this line item are variable performance fees earned for services rendered under a third-party consulting agreement.

Transaction costs - Includes legal, accounting, tax, and other professional fees incurred in connection with contemplated and completed acquisitions and divestitures. The completion of acquisitions and divestitures is often dependent on factors that may be outside of our control and unrelated to us or to the continuing operations of the acquired or divested business. In addition, the amount of acquisition-related cost is generally driven by the complexity inherent in the transaction and may not necessarily indicate the future costs of the acquired business. Excluding transaction costs allows for a better comparison of our historical performance.

Formation of Covetrus - Includes professional and consulting fees, duplicative costs associated with TSAs, and other costs incurred in connection with the separation from Former Parent and establishing Covetrus as an independent public company.

Equity method investment and non-consolidated affiliates - Includes the proportionate share of the adjustments to EBITDA of consolidated and non-consolidated affiliates where Covetrus ownership is less than 100%.

Other impairments - Includes customer relationships intangible impairments as the asset groups were not recoverable due a significant reduction in cash flows.