- Second quarter 2022 net sales of $1.22 billion, an increase of
2% year-over-year; GAAP net loss attributable to Covetrus of $(4)
million
- Non-GAAP organic net sales growth of 5% year-over-year
- Non-GAAP adjusted EBITDA was flat year-over-year at $66
million, including a $2 million year-over-year headwind from the
strengthening of the U.S. Dollar
- First half 2022 net sales of $2.37 billion, an increase of 3%
year-over-year; GAAP net loss attributable to Covetrus of $(6)
million
- Non-GAAP organic net sales growth of 6% year-over-year
- Non-GAAP adjusted EBITDA increased 5% year-over-year to $129
million, including a $4 million year-over-year headwind from the
strengthening of the U.S. Dollar
Covetrus® (Nasdaq: CVET), a global leader in animal-health
technology and services, today announced financial results for the
second quarter of 2022, which ended June 30, 2022.
“Our team executed well during the second quarter and delivered
results consistent with our expectations despite end-market and
macroeconomic turbulence, which masked some of the operational
progress we have made this year in furthering adoption of our
technology stack, growing our proprietary brands and managing
corporate costs,” said Ben Wolin, Covetrus president and CEO. “We
remain focused on executing our strategic plan, delivering against
our innovation agenda and advancing our mission to drive positive
outcomes for veterinarians, their practices and patients around the
globe."
Summary Operating Results (Unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
(In millions,
except per share data)
2022
2021
2022
2021
Net sales
$
1,217
$
1,189
$
2,365
$
2,291
Income (loss) before taxes
$
(3
)
$
(18
)
$
(2
)
$
(30
)
Net income (loss) attributable to
Covetrus
$
(4
)
$
(31
)
$
(6
)
$
(47
)
Diluted earnings (loss) per share
(EPS)
$
(0.03
)
$
(0.23
)
$
(0.04
)
$
(0.34
)
Non-GAAP Measures: (a)
Organic net sales growth
5
%
6
%
Non-GAAP Adjusted EBITDA
$
66
$
66
$
129
$
123
Non-GAAP Adjusted net income attributable
to Covetrus
$
36
$
35
$
70
$
64
(a) Non-GAAP financial measures should be considered in addition
to, but not as a substitute for, the information provided in
accordance with GAAP. Reconciliations for non-GAAP financial items
to the most directly comparable GAAP financial items are provided
under Reconciliation of Non-GAAP Financial Measures at the end of
this release.
Second Quarter 2022 Results
Net sales for the second quarter of 2022 were $1.22 billion, an
increase of 2% compared to the second quarter of 2021. Non-GAAP
organic net sales growth, which adjusts for changes in foreign
exchange and the impact of mergers, acquisitions and divestiture
activity, was 5% year-over-year, reflecting positive end-market
growth and continued market share gains in North America (9%
year-over-year), including continued strong demand for prescription
management, partially offset by more modest trends in both APAC
& Emerging Markets (2% year-over-year) and Europe (-1%
year-over-year).
Net loss attributable to Covetrus in the second quarter of 2022
was $(4) million, or a loss of $(0.03) per diluted share, which
compared to net loss attributable to Covetrus of $(31) million, or
$(0.23) per diluted share in the prior year period. The improvement
in net loss was driven primarily by a $12 million decrease in
income taxes year-over-year, a $9 million increase in gross profit
year-over-year, a $4 million decrease in selling, general and
administrative expenses year-over-year and a $2 million decrease in
net interest expense year-over-year.
Non-GAAP adjusted EBITDA was $66 million for the second quarter
of 2022 versus $66 million in the prior year period. 7%
year-over-year growth in North America, including healthy
year-over-year contribution from prescription management, and flat
Corporate expenses year-over-year were fully offset by a $2 million
negative impact from the strengthening of the U.S. Dollar and
continued challenges in certain markets within Europe. Non-GAAP
adjusted EBITDA margin was 5.4% for the second quarter of 2022, a
decrease of 20 basis points year-over-year.
Non-GAAP adjusted net income attributable to Covetrus was $36
million for the second quarter of 2022, which compared to $35
million in the prior year period, driven by the same factors
impacting non-GAAP adjusted EBITDA discussed above and a decrease
in net interest expense year-over-year.
First Half 2022 Results
Net sales for the first half of 2022 were $2.37 billion, an
increase of 3% compared to the first half of 2021. Non-GAAP organic
net sales growth, which adjusts for changes in foreign exchange and
the impact of mergers, acquisitions and divestiture activity, was
6% year-over-year, reflecting healthy growth in North America (9%
year-over-year), including continued strong demand in prescription
management, partially offset by more modest growth trends in both
APAC & Emerging Markets (3% year-over-year) and Europe (flat
year-over-year).
Net loss attributable to Covetrus in the first half of 2022 was
$(6) million, or a loss of $(0.04) per diluted share, which
compared to net loss attributable to Covetrus of $(47) million, or
$(0.34) per diluted share in the prior year period. The improvement
in net loss was driven primarily by a $24 million increase in gross
profit year-over-year, a $13 million decrease in income taxes
year-over-year and a $4 million net decrease in interest expense
year-over-year, which more than offset a $2 million increase in
selling, general and administrative expenses year-over-year.
Non-GAAP adjusted EBITDA was $129 million for the first half of
2022 versus $123 million in the prior year period. The 5%
year-over-year increase reflects 8% growth in North America,
including strong performance in prescription management, and a $4
million decline in Corporate expenses, which more than offset a $4
million negative impact from the strengthening of the U.S. Dollar
and continued challenges in certain markets within Europe. Non-GAAP
adjusted EBITDA margin was 5.5% for the first half of 2022, an
increase of 10 basis points year-over-year.
Non-GAAP adjusted net income attributable to Covetrus was $70
million for the first half of 2022, which compared to $64 million
in the prior year period, driven by the same factors impacting
non-GAAP adjusted EBITDA discussed above and a decrease in net
interest expense year-over-year.
Second Quarter 2022 Segment Financial Highlights
The Company’s operations are organized and reported by geography
-- North America, Europe, and APAC & Emerging Markets.
North America
North America segment net sales for the second quarter ended
June 30, 2022 of $783 million increased 10% compared to the same
period of the prior year. On a non-GAAP organic basis, which
adjusts for changes in foreign exchange and the impact of mergers,
acquisitions and divestiture activity, net sales increased 9%
compared to the same period of the prior year, reflecting
end-market demand, ongoing supply chain market share gains and
continued growth in prescription management.
North America segment adjusted EBITDA for the second quarter
ended June 30, 2022 was $63 million, an increase of 7% compared to
the same period of the prior year, reflecting continued growth in
prescription management profitability. North America segment
adjusted EBITDA margin was 8.0% for the second quarter of 2022,
down 30 basis points year-over-year.
Europe
Europe segment net sales for the second quarter ended June 30,
2022 of $327 million decreased (11)% compared to the same period of
the prior year. On a non-GAAP organic basis, which adjusts for
changes in foreign exchange and the impact of mergers, acquisitions
and divestiture activity, net sales decreased (1)% compared to the
same period of the prior year. Growth in the Company's businesses
in Netherlands, Poland, Ireland, and Romania were more than offset
by a decline in net sales in the U.K. and in Germany.
Europe segment adjusted EBITDA for the second quarter ended June
30, 2022 was $17 million, a decrease of (15)% compared to the same
period of the prior year. This includes a $2 million negative
impact from the strengthening of the U.S. Dollar and lower
profitability in the Company's proprietary brands business, which
more than offset a combined $1 million year-over-year improvement
in U.K./Germany profitability following recent cost actions. Europe
segment adjusted EBITDA margin was 5.2% for the second quarter of
2022, a decrease of 30 basis points year-over-year.
APAC & Emerging Markets
APAC & Emerging Markets segment net sales for the second
quarter ended June 30, 2022 of $109 million, a decrease of $(5)
million compared to the same period of the prior year. On a
non-GAAP organic basis, which adjusts for changes in foreign
exchange and the impact of mergers, acquisitions and divestiture
activity, net sales increased 2% compared to the same period of the
prior year, reflecting organic growth in Australia that more than
offset declines in Brazil and New Zealand during the quarter.
APAC & Emerging Markets segment adjusted EBITDA for the
second quarter ended June 30, 2022 of $8 million decreased (11)%
compared to the same period of the prior year, including the
unfavorable impact from the strengthening U.S. Dollar. APAC &
Emerging Markets segment adjusted EBITDA margin was 7.3% for the
second quarter of 2022, a decrease of 60 basis points
year-over-year.
Financial Position and Liquidity
Covetrus used $(6) million of net cash from operating activities
during the quarter ended June 30, 2022 as compared to $60 million
of cash generation during the prior year period. Free cash flow, a
non-GAAP financial measure that is defined as cash flow from
operating activities less purchases of property, equipment and
software, was $(21) million during the quarter ended June 30, 2022
as compared to $47 million in the prior year period. The $(68)
million year-over-year decline in non-GAAP free cash flow primarily
reflects negative movements in net working capital as well as a $2
million increase in capital expenditures year-over-year.
As of June 30, 2022, the Company had $87 million in cash and
cash equivalents, $1.05 billion in term loan debt, and no
borrowings outstanding on its $300 million revolving credit
facility. The Company ended the second quarter with $385 million in
liquidity, comprised of cash and cash equivalents and availability
under the Company's revolving credit facility, and was in
compliance with the covenants in its credit agreement as of June
30, 2022.
Conference Call and Financial Guidance
In light of the Company’s previously announced agreement to be
acquired by Clayton, Dubilier & Rice and TPG, Covetrus will not
be providing an update to forward-looking financial projections and
will not conduct a quarterly earnings call nor share a supplemental
earnings presentation with the financial community that discusses
second quarter 2022 results.
About Covetrus
Covetrus is a global animal-health technology and services
company dedicated to empowering veterinary practice partners to
drive improved health and financial outcomes. We are bringing
together products, services, and technology into a single platform
that connects our customers to the solutions and insights they need
to work best. Our passion for the well-being of animals and those
who care for them drives us to advance the world of veterinary
medicine. Covetrus is headquartered in Portland, Maine with more
than 5,700 employees serving over 100,000 customers around the
globe. For more information about Covetrus visit
https://covetrus.com/.
Forward-Looking Statements
This press release contains certain statements that are
forward-looking within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. We may, in some cases use terms such as
"predicts," "believes," "potential," "continue," "anticipates,"
"estimates," "expects," "plans," "intends," "may," "could,"
"might," "likely," "will," "should," or other words that convey
uncertainty of the future events or outcomes to identify these
forward-looking statements. Such statements are subject to numerous
risks and uncertainties, and actual results could differ materially
from those anticipated due to a number of factors including, but
not limited to, the potential for political, social, or economic
unrest, terrorism, hostilities, or war, including the ongoing war
between Russia and Ukraine and the impact of financial and economic
sanctions on the regional and global economy; the impact of the
Merger Agreement, including the disruption of management's
attention from ongoing operations, inability to complete the Merger
due to failure to obtain shareholder approval or satisfy other
closing conditions, risk that if the Merger is not completed, the
market price of our common stock could decline, risk that we may
not be able to retain key personnel, the impact on our
relationships with our customers and suppliers, the impact on our
operations, the occurrence of any event, change or other
circumstances that could give rise to the termination of the Merger
Agreement, including a termination under circumstances that could
require the Company to pay a termination fee to Corgi Bidco, Inc.;
the impact of inflationary effects and changes in foreign currency
exchange rates on the Company; access to financial markets, the
impact of interest rates on our debt service costs and any new debt
financing we may seek to execute; the effect of health epidemics,
including the COVID-19 pandemic, on our business and the success of
any measures we have taken or may take in the future in response
thereto, including compliance with prolonged measures to contain
the spread of COVID-19, which may impact our ability to continue
operations at our distribution centers and pharmacies; the ability
to achieve performance targets, including managing our growth
effectively; the ability to launch new products; the ability to
successfully integrate acquisitions, operations, and employees; the
ability to continue to execute on our strategic plan; the ability
to attract and retain key personnel; the ability to manage
relationships with our supplier network, including negotiating
acceptable pricing and other terms with these partners; the ability
to attract and retain customers in a price sensitive environment;
the ability to maintain quality standards in our technology product
offerings, as well as associated customer service interactions to
minimize loss of existing Customers, and attract new Customers;
changes in the legislative landscape in which we operate, including
potential corporate tax reform, and our ability to adapt to those
changes as well as adaptation by the third parties we are dependent
upon for supply and distribution; the impact of litigation; the
impact of accounting pronouncements, seasonality of our business,
leases, expenses, interest expense, and debt; sufficiency of cash
and access to liquidity; cybersecurity risks, including risk
associated with our dependence on third-party service providers as
a large portion of our workforce is working from home; and those
additional risks discussed under the heading "Risk Factors" in our
Annual Report on Form 10-K filed on February 28, 2022. Our
forward-looking statements are based on current beliefs and
expectations of our management team and, except as required by law,
we undertake no obligations to make any revisions to the
forward-looking statements contained in this release or to update
them to reflect events or circumstances occurring after the date of
this release, whether as a result of new information, future
developments or otherwise. Investors are cautioned not to place
undue reliance on these forward-looking statements.
Covetrus® is a registered trademark of Covetrus, Inc.
COVETRUS, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In millions, except share
amounts)
June 30, 2022
December 31, 2021
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
87
$
183
Accounts receivable, net of allowance of
$4 and $4
550
480
Inventories, net
587
583
Other receivables
106
75
Prepaid expenses and other
48
30
Total current assets
1,378
1,351
Non-current assets:
Property and equipment, net of accumulated
depreciation of $148 and $135
156
144
Operating lease right-of-use assets,
net
131
137
Goodwill
1,268
1,247
Other intangibles, net of accumulated
amortization of $503 and $451
380
439
Investments
45
49
Other non-current assets
40
43
Total assets
$
3,398
$
3,410
LIABILITIES,
MEZZANINE EQUITY, AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable
$
446
$
442
Current maturities of long-term debt and
other borrowings
66
32
Accrued payroll and related
liabilities
58
63
Accrued taxes
18
24
Accrued expenses and other current
liabilities
145
137
Total current liabilities
733
698
Non-current liabilities:
Long-term debt and other borrowings,
net
983
1,014
Deferred income taxes
11
13
Other liabilities
144
151
Total liabilities
1,871
1,876
Commitments and contingencies
Mezzanine equity:
Redeemable non-controlling interests
22
23
Shareholders' equity:
Common stock
1
1
Accumulated other comprehensive loss
(110
)
(79
)
Additional paid-in capital
2,701
2,670
Accumulated deficit
(1,087
)
(1,081
)
Total shareholders’ equity
1,505
1,511
Total liabilities, mezzanine equity,
and shareholders’ equity
$
3,398
$
3,410
Common shares authorized, par value of
$0.01
$
675,000,000
$
675,000,000
Common shares issued and outstanding
$
139,839,264
$
138,011,969
COVETRUS, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(In millions, except per share
data) (Unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2022
2021
2022
2021
Net sales
$
1,217
$
1,189
$
2,365
$
2,291
Cost of sales
988
969
1,911
1,861
Gross profit
229
220
454
430
Operating expenses:
Selling, general and administrative
225
229
444
442
Operating income (loss)
4
(9
)
10
(12
)
Other income (expense):
Interest expense, net
(7
)
(9
)
(14
)
(18
)
Other, net
—
—
2
—
Income (loss) before taxes
(3
)
(18
)
(2
)
(30
)
Income tax benefit (expense)
(1
)
(13
)
(4
)
(17
)
Net income (loss)
$
(4
)
$
(31
)
$
(6
)
$
(47
)
Net (income) loss attributable to
non-controlling interests
—
—
—
—
Net income (loss) attributable to
Covetrus
$
(4
)
$
(31
)
$
(6
)
$
(47
)
Earnings (loss) per share attributable
to Covetrus:
Basic
$
(0.03
)
$
(0.23
)
$
(0.04
)
$
(0.34
)
Diluted
$
(0.03
)
$
(0.23
)
$
(0.04
)
$
(0.34
)
Weighted-average common shares
outstanding:
Basic
140
137
139
137
Diluted
140
137
139
137
COVETRUS, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Six Months Ended June
30,
2022
2021
Cash flows from operating
activities:
Net income (loss)
$
(6
)
$
(47
)
Adjustments to reconcile net income (loss)
to net cash provided by (used for) operating activities:
Depreciation and amortization
81
86
Amortization of right-of-use assets
15
14
Share-based compensation expense
23
25
Benefit for deferred income taxes
1
(11
)
Amortization of debt issuance costs
3
3
Other
(2
)
3
Changes in operating assets and
liabilities, net of acquisitions:
Accounts receivable, net
(85
)
(12
)
Inventories, net
(19
)
(30
)
Other assets and liabilities
(63
)
(33
)
Accounts payable and accrued expenses
13
5
Net cash provided by (used for)
operating activities
(39
)
3
Cash flows from investing
activities:
Investments in property, equipment, and
software
(26
)
(28
)
Payments related to equity investments and
business acquisitions, net of cash acquired
(18
)
—
Net cash provided by (used for)
investing activities
(44
)
(28
)
Cash flows from financing
activities:
Proceeds from revolving line of credit
227
—
Repayment of revolving line of credit
(227
)
—
Proceeds from share-based awards
5
3
Tax payments related to share-based
awards
(7
)
(13
)
Distributions to non-controlling
shareholders
—
(1
)
Deferred payments related to equity
investments and business acquisitions
(1
)
(13
)
Payments related to the buy-out of
non-controlling interests in subsidiaries of Covetrus
(3
)
(10
)
Net cash provided by (used for)
financing activities
(6
)
(34
)
Effect of exchange rate changes on cash
and cash equivalents
(7
)
(1
)
Net change in cash and cash
equivalents
(96
)
(60
)
Cash and cash equivalents, beginning of
period
183
290
Cash and cash equivalents, end of
period
$
87
$
230
Supplemental disclosures of non-cash
investing and financing activities:
Right-of-use assets obtained in exchange
for new operating lease liabilities
$
9
$
5
Common stock issued in business
acquisition
$
10
$
—
Segment Adjusted EBITDA
The Company provides adjusted EBITDA by segment as a
supplemental measure to GAAP. Adjusted EBITDA by segment is among
the primary metrics by which management evaluates the performance
of the business. Adjusted EBITDA by segment has certain limitations
in that it does not take into account the impact of certain
expenses to our consolidated statements of operations, including
the impact of share-based compensation, strategic consulting,
transaction costs, formation of Covetrus expenses, separation
programs and executive severance, certain IT infrastructure
expenses necessary to establish ourselves as a newly public
company, goodwill impairment charges, capital structure-related
fees, equity method investment and non-consolidated affiliates,
operating lease right-of-use asset impairments, the proportionate
share of the adjustments to EBITDA of consolidated and
non-consolidated affiliates where Covetrus ownership is less than
100%, managed exits from businesses we are exiting or closing, and
other items, net. The Company does not allocate to its segments
expenses managed at the corporate level, such as corporate wages
and related benefits, corporate occupancy costs, professional
services utilized at the corporate level, and non-recurring
expenses. Other companies may not define or calculate adjusted
EBITDA by segment in the same way; as a result, adjusted EBITDA by
segment may not be comparable to similarly titled measures reported
by other companies.
The following table summarize adjusted EBITDA by segment
(Unaudited)
Three Months Ended June
30,
(In
millions)
2022
% of
Respective
Net Sales
2021
% of
Respective
Net Sales
$ Change
% Change
North America
$
63
8.0
%
$
59
8.3
%
$
4
7
%
Europe
17
5.2
20
5.5
(3
)
(15
)
APAC & Emerging Markets
8
7.3
9
7.9
(1
)
(11
)
Corporate
(22
)
NM
(22
)
NM
—
—
Total Non-GAAP Adjusted EBITDA
$
66
5.4
%
$
66
5.6
%
$
—
—
%
Six Months Ended June
30,
(In
millions)
2022
% of
Respective
Net Sales
2021
% of
Respective
Net Sales
$ Change
% Change
North America
$
120
8.1
%
$
111
8.2
%
$
9
8
%
Europe
35
5.2
41
5.6
(6
)
(15
)
APAC & Emerging Markets
18
8.1
19
8.4
(1
)
(5
)
Corporate
(44
)
NM
(48
)
NM
4
8
Total Non-GAAP Adjusted EBITDA
$
129
5.5
%
$
123
5.4
%
$
6
5
%
Numbers in table may not foot or
cross-foot due to rounding.
Reconciliation of Non-GAAP Financial Measures
In addition to the financial information presented in accordance
with U.S. generally accepted accounting principles, or GAAP, the
Company is providing certain non-GAAP financial measures (discussed
below). Management uses these measures in the management of our
business and believes that they are useful to investors in
evaluating our ongoing operating results and trends.
The following tables reconcile non-GAAP financial measures to
the most directly comparable financial measures calculated and
presented in accordance with GAAP. Covetrus management believes
that these non-GAAP financial measures provide useful additional
information to investors and management regarding Covetrus’ results
of operations as they provide another measure of Covetrus’
profitability and ability to service its debt, and are considered
important to financial analysts covering Covetrus’ industry.
These non-GAAP financial measures have limitations as an
analytic tool and should not be considered in isolation or as a
substitute for net income or any other measure of financial
performance reported in accordance with GAAP. Covetrus’ non-GAAP
measures may be calculated differently than similarly named
measures reported by other companies. In addition, using non-GAAP
measures may have limited value as they exclude certain items that
may have a material impact on reported financial results and cash
flows. When analyzing Covetrus’ performance, it is important to
evaluate each adjustment in the reconciliation tables and use
adjusted measures in addition to, and not as an alternative to,
GAAP measures.
Non-GAAP Organic Net Sales Growth and Segment Organic Net Sales
(Unaudited)
Covetrus delivers products, software and technology-enabled
services across the globe through three reportable segments: North
America, Europe, and APAC & Emerging Markets.
Organic net sales growth is a non-GAAP measure that Covetrus
uses to evaluate period-over-period financial performance. The
Company believes this non-GAAP financial metric provides useful
information to investors and management about the Company's
operating results, enhances the overall understanding of past
financial performance and future prospects and is a useful measure
for period-to-period comparisons. Organic net sales growth excludes
the impact of foreign exchange fluctuations, M&A and
divestitures, which can impact year-over-year comparisons.
The following table summarize non-GAAP organic net sales growth
for Covetrus and each reportable segment:
Non-GAAP Organic Net Sales (Unaudited)
Three Months Ended June
30,
(In
millions)
2022
2021
Y/Y Growth
% Change
from FX
% Change
from Mergers
and
Acquisitions
% Change
from
Divestitures
Non-GAAP
Organic Net
Sales Growth
Net sales:
$
1,217
$
1,189
2
%
(4
)%
1
%
—
%
5
%
North America
783
713
10
%
—
%
1
%
—
%
9
%
Europe
327
366
(11
)%
(10
)%
1
%
—
%
(1
)%
APAC & Emerging Markets
109
114
(4
)%
(6
)%
—
%
—
%
2
%
Eliminations
(2
)
(4
)
NM
—
%
—
%
—
%
—
%
Six Months Ended June
30,
(In
millions)
2022
2021
Y/Y Growth
% Change
from FX
% Change
from Mergers
and
Acquisitions
% Change
from
Divestitures
Non-GAAP
Organic Net
Sales Growth
Net sales:
$
2,365
$
2,291
3
%
(3
)%
1
%
—
%
6
%
North America
1,479
1,348
10
%
—
%
1
%
—
%
9
%
Europe
671
727
(8
)%
(8
)%
1
%
—
%
—
%
APAC & Emerging Markets
221
226
(2
)%
(5
)%
—
%
—
%
3
%
Eliminations
(6
)
(10
)
NM
—
%
—
%
—
%
—
%
Numbers in table may not foot or
cross-foot due to rounding.
Non-GAAP EBITDA, Adjusted EBITDA, and Adjusted Net Income
(Loss)
EBITDA, adjusted EBITDA, and adjusted net income are non-GAAP
financial measures used to: (i) aid management and investors with
year-over-year comparability, (ii) determine management performance
under the Company’s compensation plans, (iii) plan and forecast,
(iv) communicate the Company’s financial performance to its board
of directors, shareholders, and investment analysts, and (v)
understand the Company’s operating performance without regard to
items we do not consider a component of the Company’s core ongoing
operating performance. Such measures should be considered in
addition to, but not as a substitute for, the information provided
in accordance with GAAP. Non-GAAP adjusted EBITDA adjustments
include share-based compensation, strategic consulting, transaction
costs, formation of Covetrus expenses, separation programs and
executive severance, certain IT infrastructure expenses necessary
to establish ourselves as a newly public company, goodwill
impairment charges, capital structure-related fees, other
impairments, the proportionate share of the adjustments of
consolidated and non-consolidated affiliates where Covetrus
ownership is less than 100%, and other income and expense items,
net. Non-GAAP adjusted net income adjustments include the
adjustments listed above along with amortization of intangible
assets, and the tax effect of pretax items excluded from adjusted
net income attributable to Covetrus is computed using a statutory
tax rate after taking into account the impact of permanent
differences and valuation allowances.
A reconciliation of EBITDA, adjusted EBITDA and adjusted net
income to net income (loss) attributable to Covetrus, the most
directly comparable GAAP financial measure, is as follows:
Reconciliation of Net Income (Loss)
Attributable to Covetrus to Non-GAAP Adjusted EBITDA
(Unaudited)
Three Months Ended June
30,
(In
millions)
2022
2021
Net income (loss) attributable to
Covetrus
$
(4
)
$
(31
)
Plus: Depreciation and amortization
41
43
Plus: Interest expense, net
7
9
Plus: Income tax (benefit) expense
1
13
EBITDA
45
34
Plus: Share-based compensation
10
14
Plus: Strategic consulting
—
12
Plus: Transaction costs
7
1
Plus: Separation programs and executive
severance
2
2
Plus: Formation of Covetrus
—
—
Plus: Equity method investments and
non-consolidated affiliates
1
—
Plus: Other impairments
—
—
Plus: Other items, net
1
3
Non-GAAP Adjusted EBITDA
66
66
Depreciation and amortization
(41
)
(43
)
Amortization of acquired intangibles
31
34
Interest expense, net
(7
)
(9
)
Non-GAAP Adjusted income before
taxes
49
48
Adjusted income tax expense
(13
)
(13
)
Non-GAAP Adjusted net income
attributable to Covetrus
$
36
$
35
Below is a listing of adjustments to EBITDA included in the
reconciliation above for the six months ended June 30, 2022 and
2021:
Reconciliation of Net Income (Loss)
Attributable to Covetrus to Non-GAAP Adjusted EBITDA
(Unaudited)
Six Months Ended June
30,
(In
millions)
2022
2021
Net income (loss) attributable to
Covetrus
$
(6
)
$
(47
)
Plus: Depreciation and amortization
81
86
Plus: Interest expense, net
14
18
Plus: Income tax (benefit) expense
4
17
EBITDA
93
74
Plus: Share-based compensation
23
25
Plus: Strategic consulting
—
14
Plus: Transaction costs
8
2
Plus: Separation programs and executive
severance
2
2
Plus: Formation of Covetrus
—
2
Plus: Equity method investment and
non-consolidated affiliates
2
1
Plus: Other impairments
—
1
Plus (less): Other items, net
1
2
Non-GAAP Adjusted EBITDA
129
123
Depreciation and amortization
(81
)
(86
)
Amortization of acquired intangibles
62
69
Interest expense, net
(14
)
(18
)
Non-GAAP Adjusted income before
taxes
96
88
Adjusted income tax expense
(26
)
(24
)
Non-GAAP Adjusted net income
attributable to Covetrus
$
70
$
64
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-related costs allows for a better comparison
of our historical performance. During the three and six months
ended June 30, 2022, we incurred $6 million and $7 million,
respectively, related to pending acquisition of the Company by
Clayton, Dubilier & Rice and TPG.
Formation of Covetrus - 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.
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.
Non-GAAP Free Cash Flow (Unaudited)
Free cash flow is a non-GAAP financial measure and should be
considered in addition to, but not as a substitute for, the
information provided in accordance with GAAP. Free cash flow is the
cash the Company generates through its operations, less the cost of
expenditures on property and equipment. The Company believes that
it is an important measurement since it shows how efficient a
company is at generating cash.
Non-GAAP Free Cash Flow (Unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
(In
millions)
2022
2021
2022
2021
Net cash provided by (used for)
operating activities
$
(6
)
$
60
$
(39
)
$
3
Less: Investments in property, equipment,
and software
(15
)
(13
)
(26
)
(28
)
Non-GAAP Free cash flow
$
(21
)
$
47
$
(65
)
$
(25
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220804005330/en/
Investor Contact: Nicholas Jansen
nicholas.jansen@covetrus.com (207) 550-8106
Media Contact: Mona Downey mona.downey@covetrus.com
Covetrus (NASDAQ:CVET)
Gráfica de Acción Histórica
De Nov 2024 a Dic 2024
Covetrus (NASDAQ:CVET)
Gráfica de Acción Histórica
De Dic 2023 a Dic 2024
