UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________________________________________________

FORM 10-Q

____________________________________________________________


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED July ~~31, 2021.~~30, 2022.


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No. 0-20572

__________________________________________________________

PATTERSON COMPANIES, INC.

(Exact Name of Registrant as Specified in Its Charter)

____________________________________________________________


Minnesota		41-0886515
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification Number)
1031 Mendota Heights Road
St. Paul	Minnesota	55120
(Address of Principal Executive Offices)		(Zip Code)

(651) 686-1600

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of exchange on which registered
Common Stock, par value $.01	PDCO	NASDAQ Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~September 2, 2021,~~August 23, 2022, there were ~~97,322,000~~96,899,000 shares of Common Stock of the registrant issued and outstanding.

Table of Contents

PATTERSON COMPANIES, INC.

Table of Contents

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PATTERSON COMPANIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

(Unaudited)


		July 31, 2021		April 24, 2021			July 30, 2022		April 30, 2022
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	136,930	$	143,244	Cash and cash equivalents	$	149,560	$	142,014
Receivables, net of allowance for doubtful accounts of $5,857 and $6,138		373,533		449,235
Receivables, net of allowance for doubtful accounts of $6,090 and $5,913						Receivables, net of allowance for doubtful accounts of $6,090 and $5,913	370,347		447,162
Inventory	Inventory	770,366		736,778		Inventory	874,817		785,604
Prepaid expenses and other current assets	Prepaid expenses and other current assets	330,655		286,672		Prepaid expenses and other current assets	311,257		304,242
Total current assets	Total current assets	1,611,484		1,615,929		Total current assets	1,705,981		1,679,022
Property and equipment, net	Property and equipment, net	216,397		219,438		Property and equipment, net	216,269		213,140
Operating lease right-of-use assets, net	Operating lease right-of-use assets, net	78,310		77,217		Operating lease right-of-use assets, net	73,841		70,722
Long-term receivables, net	Long-term receivables, net	191,799		223,970		Long-term receivables, net	135,632		138,812
Goodwill, net	Goodwill, net	140,985		139,932		Goodwill, net	140,657		140,630
Identifiable intangibles, net	Identifiable intangibles, net	284,394		279,644		Identifiable intangibles, net	242,771		252,614
Investments	Investments	140,193		105,522		Investments	140,113		139,182
Other non-current assets		87,287		89,859
Other non-current assets, net						Other non-current assets, net	103,104		107,508
Total assets	Total assets	$	2,750,849	$	2,751,511	Total assets	$	2,758,368	$	2,741,630
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	593,091	$	609,264	Accounts payable	$	655,648	$	681,321
Accrued payroll expense	Accrued payroll expense	63,650		118,425		Accrued payroll expense	59,941		102,266
Other accrued liabilities	Other accrued liabilities	236,005		175,975		Other accrued liabilities	153,989		173,734
Operating lease liabilities	Operating lease liabilities	32,388		32,252		Operating lease liabilities	28,986		29,348
Current maturities of long-term debt		100,750		100,750

Borrowings on revolving credit	Borrowings on revolving credit	42,000		53,000		Borrowings on revolving credit	145,000		29,000
Total current liabilities	Total current liabilities	1,067,884		1,089,666		Total current liabilities	1,043,564		1,015,669
Long-term debt	Long-term debt	487,818		487,545		Long-term debt	488,809		488,554
Non-current operating lease liabilities	Non-current operating lease liabilities	48,719		48,318		Non-current operating lease liabilities	47,455		43,332
Other non-current liabilities	Other non-current liabilities	165,823		161,311		Other non-current liabilities	151,525		151,440
Total liabilities	Total liabilities	1,770,244		1,786,840		Total liabilities	1,731,353		1,698,995
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Common stock, $0.01 par value: 600,000 shares authorized; 97,235 and 96,813 shares issued and outstanding		972		968
Common stock, $0.01 par value: 600,000 shares authorized; 96,899 and 96,762 shares issued and outstanding						Common stock, $0.01 par value: 600,000 shares authorized; 96,899 and 96,762 shares issued and outstanding	969		968
Additional paid-in capital	Additional paid-in capital	176,182		169,099		Additional paid-in capital	205,531		200,520
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(62,007)		(62,592)		Accumulated other comprehensive loss	(86,246)		(81,516)
Retained earnings	Retained earnings	864,197		855,741		Retained earnings	905,632		921,704

Total Patterson Companies, Inc. stockholders' equity	Total Patterson Companies, Inc. stockholders' equity	979,344		963,216		Total Patterson Companies, Inc. stockholders' equity	1,025,886		1,041,676
Noncontrolling interests	Noncontrolling interests	1,261		1,455		Noncontrolling interests	1,129		959
Total stockholders’ equity	Total stockholders’ equity	980,605		964,671		Total stockholders’ equity	1,027,015		1,042,635
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	2,750,849	$	2,751,511	Total liabilities and stockholders’ equity	$	2,758,368	$	2,741,630

See accompanying notes

Table of Contents

PATTERSON COMPANIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND OTHER COMPREHENSIVE INCOME

(In thousands, except per share amounts)

(Unaudited)


		Three Months Ended				Three Months Ended
		July 31, 2021		July 25, 2020				July 30, 2022		July 31, 2021
Net sales	Net sales	$	1,614,876	$	1,245,837		Net sales	$	1,523,265	$	1,614,876
Cost of sales	Cost of sales	1,337,074		992,021			Cost of sales	1,211,132		1,337,074
Gross profit	Gross profit	277,802		253,816			Gross profit	312,133		277,802
Operating expenses	Operating expenses	317,331		215,944			Operating expenses	277,289		317,331
Operating (loss) income		(39,529)		37,872
Operating income (loss)							Operating income (loss)	34,844		(39,529)
Other income (expense):	Other income (expense):						Other income (expense):
Gains on investments	Gains on investments	87,827		—			Gains on investments	—		87,827
Other income, net	Other income, net	1,423		2,034			Other income, net	1,780		1,423
Interest expense	Interest expense	(5,195)		(6,691)			Interest expense	(5,563)		(5,195)
Income before taxes	Income before taxes	44,526		33,215			Income before taxes	31,061		44,526
Income tax expense	Income tax expense	10,724		9,013			Income tax expense	6,801		10,724

Net income	Net income	33,802		24,202			Net income	24,260		33,802
Net loss attributable to noncontrolling interests	Net loss attributable to noncontrolling interests	(194)		(205)			Net loss attributable to noncontrolling interests	(330)		(194)
Net income attributable to Patterson Companies, Inc.	Net income attributable to Patterson Companies, Inc.	$	33,996	$	24,407		Net income attributable to Patterson Companies, Inc.	$	24,590	$	33,996
Earnings per share attributable to Patterson Companies, Inc.:	Earnings per share attributable to Patterson Companies, Inc.:						Earnings per share attributable to Patterson Companies, Inc.:

Basic	Basic	$	0.35	$	0.26		Basic	$	0.25	$	0.35

Diluted	Diluted	$	0.35	$	0.25		Diluted	$	0.25	$	0.35
Weighted average shares:	Weighted average shares:						Weighted average shares:
Basic	Basic	96,864		95,189			Basic	96,629		96,864
Diluted	Diluted	98,255		95,843			Diluted	97,794		98,255
Dividends declared per common share	Dividends declared per common share	$	0.26	$	0.26		Dividends declared per common share	$	0.26	$	0.26
Comprehensive income:	Comprehensive income:						Comprehensive income:
Net income	Net income	$	33,802	$	24,202		Net income	$	24,260	$	33,802
Foreign currency translation gain		324		12,589
Foreign currency translation (loss) gain							Foreign currency translation (loss) gain	(4,991)		324
Cash flow hedges, net of tax	Cash flow hedges, net of tax	261		260			Cash flow hedges, net of tax	261		261
Comprehensive income	Comprehensive income	$	34,387	$	37,051		Comprehensive income	$	19,530	$	34,387

See accompanying notes

Table of Contents

PATTERSON COMPANIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)


		Common Stock			Additional Paid-in Capital				Accumulated Other Comprehensive Loss		Retained Earnings					Unearned ESOP Shares			Non-controlling Interests				Total			Common Stock				Additional Paid-in Capital			Accumulated Other Comprehensive Loss				Retained Earnings				Non-controlling Interests				Total
		Shares	Amount												Shares						Amount															Total
Balance at April 25, 2020		95,947	$	959			$	146,606					$	(97,039)				$	799,652			$	(16,061)			$	2,327	$	836,444
Balance at April 24, 2021																									Balance at April 24, 2021	96,813		$	968		$	169,099		$	(62,592)				$	855,741			$	1,455			$	964,671
Foreign currency translation	Foreign currency translation	—	—		—				12,589		—					—			—				12,589		Foreign currency translation	—		—		—			324				—				—				324
Cash flow hedges	Cash flow hedges	—	—		—				260		—					—			—				260		Cash flow hedges	—		—		—			261				—				—				261
Net income (loss)	Net income (loss)	—	—		—				—		24,407					—			(205)				24,202		Net income (loss)	—		—		—			—				33,996				(194)				33,802
Dividends declared	Dividends declared	—	—		—				—		(24,472)					—			—				(24,472)		Dividends declared	—		—		—			—				(25,540)				—				(25,540)
Common stock issued and related tax benefits	Common stock issued and related tax benefits	309	4		(899)				—		—					—			—				(895)		Common stock issued and related tax benefits	422		4		(756)			—				—				—				(752)

Stock based compensation		—	—		6,610				—		—					—			—				6,610
Stock-based compensation																									Stock-based compensation	—		—		7,839			—				—				—				7,839

Balance at July 25, 2020		96,256	963		152,317				(84,190)		799,587					(16,061)			2,122				854,738
Balance at July 31, 2021																									Balance at July 31, 2021	97,235		972		176,182			(62,007)				864,197				1,261				980,605
Foreign currency translation	Foreign currency translation	—	—		—				3,327		—					—			—				3,327		Foreign currency translation	—		—		—			440				—				—				440
Cash flow hedges	Cash flow hedges	—	—		—				261		—					—			—				261		Cash flow hedges	—		—		—			260				—				—				260
Net income (loss)	Net income (loss)	—	—		—				—		54,060					—			(234)				53,826		Net income (loss)	—		—		—			—				48,330				(392)				47,938
Dividends declared	Dividends declared	—	—		—				—		(24,903)					—			—				(24,903)		Dividends declared	—		—		—			—				(25,630)				—				(25,630)
Common stock issued and related tax benefits	Common stock issued and related tax benefits	240	2		1,209				—		—					—			—				1,211		Common stock issued and related tax benefits	257		3		2,708			—				—				—				2,711

Stock based compensation		—	—		4,267				—		—					—			—				4,267
Stock-based compensation																									Stock-based compensation	—		—		5,658			—				—				—				5,658

Balance at October 24, 2020		96,496	965		157,793				(80,602)		828,744					(16,061)			1,888				892,727
Balance at October 30, 2021																									Balance at October 30, 2021	97,492		975		184,548			(61,307)				886,897				869				1,011,982
Foreign currency translation	Foreign currency translation	—	—		—				11,790		—					—			—				11,790		Foreign currency translation	—		—		—			(6,506)				—				—				(6,506)
Cash flow hedges	Cash flow hedges	—	—		—				261		—					—			—				261		Cash flow hedges	—		—		—			261				—				—				261
Net income (loss)	Net income (loss)	—	—		—				—		48,759					—			(192)				48,567		Net income (loss)	—		—		—			—				57,006				(431)				56,575
Dividends declared	Dividends declared	—	—		—				—		(25,265)					—			—				(25,265)		Dividends declared	—		—		—			—				(25,592)				—				(25,592)
Common stock issued and related tax benefits	Common stock issued and related tax benefits	125	1		1,505				—		—					—			—				1,506		Common stock issued and related tax benefits	95		1		2,070			—				—				—				2,071

Stock based compensation		—	—		5,019				—		—					—			—				5,019

Balance at January 23, 2021		96,621	966		164,317				(68,551)		852,238					(16,061)			1,696				934,605
Stock-based compensation																									Stock-based compensation	—		—		4,887			—				—				—				4,887
Contribution from noncontrolling interest																									Contribution from noncontrolling interest	—		—		—			—				—				500				500
Balance at January 29, 2022																									Balance at January 29, 2022	97,587		976		191,505			(67,552)				918,311				938				1,044,178
Foreign currency translation	Foreign currency translation	—	—		—				5,699		—					—			—				5,699		Foreign currency translation	—		—		—			(14,224)				—				—				(14,224)
Cash flow hedges	Cash flow hedges	—	—		—				260		—					—			—				260		Cash flow hedges	—		—		—			260				—				—				260
Net income (loss)	Net income (loss)	—	—		—				—		28,755					—			(241)				28,514		Net income (loss)	—		—		—			—				63,878				(479)				63,399
Dividends declared	Dividends declared	—	—		—				—		(25,252)					—			—				(25,252)		Dividends declared	—		—		—			—				(25,495)				—				(25,495)
Common stock issued and related tax benefits	Common stock issued and related tax benefits	192	2		(545)				—		—					—			—				(543)		Common stock issued and related tax benefits	207		2		3,594			—				—				—				3,596

Stock based compensation		—	—		5,327				—		—					—			—				5,327
ESOP activity		—	—		—				—		—					16,061			—				16,061
Balance at April 24, 2021		96,813	$	968	$	169,099			$	(62,592)	$	855,741				$	—		$	1,455			$	964,671
Repurchases of common stock																									Repurchases of common stock	(1,032)		(10)		—			—				(34,990)				—				(35,000)
Stock-based compensation																									Stock-based compensation	—		—		5,421			—				—				—				5,421
Contribution from noncontrolling interest																									Contribution from noncontrolling interest	—		—		—			—				—				500				500
Balance at April 30, 2022																									Balance at April 30, 2022	96,762		$	968	$	200,520		$	(81,516)			$	921,704			$	959			$	1,042,635

See accompanying notes

Table of Contents

PATTERSON COMPANIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)


		Common Stock			Additional Paid-in Capital				Accumulated Other Comprehensive Loss		Retained Earnings					Unearned ESOP Shares			Non-controlling Interests				Total			Common Stock				Additional Paid-in Capital			Accumulated Other Comprehensive Loss				Retained Earnings				Non-controlling Interests				Total
		Shares	Amount												Shares						Amount															Total
Balance at April 24, 2021		96,813	$	968			$	169,099					$	(62,592)				$	855,741			$	—			$	1,455	$	964,671
Balance at April 30, 2022																									Balance at April 30, 2022	96,762		$	968		$	200,520		$	(81,516)				$	921,704			$	959			$	1,042,635
Foreign currency translation	Foreign currency translation	—	—		—				324		—					—			—				324		Foreign currency translation	—		—		—			(4,991)				—				—				(4,991)
Cash flow hedges	Cash flow hedges	—	—		—				261		—					—			—				261		Cash flow hedges	—		—		—			261				—				—				261
Net income (loss)	Net income (loss)	—	—		—				—		33,996					—			(194)				33,802		Net income (loss)	—		—		—			—				24,590				(330)				24,260
Dividends declared	Dividends declared	—	—		—				—		(25,540)					—			—				(25,540)		Dividends declared	—		—		—			—				(25,667)				—				(25,667)
Common stock issued and related tax benefits	Common stock issued and related tax benefits	422	4		(756)				—		—					—			—				(752)		Common stock issued and related tax benefits	653		6		(2,148)			—				—				—				(2,142)
Repurchases of common stock																									Repurchases of common stock	(516)		(5)		—			—				(14,995)				—				(15,000)
Stock-based compensation																									Stock-based compensation	—		—		7,159			—				—				—				7,159
Contribution from noncontrolling interest																									Contribution from noncontrolling interest	—		—		—			—				—				500				500

Stock based compensation		—	—		7,839				—		—					—			—				7,839

Balance at July 31, 2021		97,235	$	972	$	176,182			$	(62,007)	$	864,197				$	—		$	1,261			$	980,605
Balance at July 30, 2022																									Balance at July 30, 2022	96,899		$	969	$	205,531		$	(86,246)			$	905,632			$	1,129			$	1,027,015

See accompanying notes

Table of Contents

PATTERSON COMPANIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


		Three Months Ended					Three Months Ended
		July 31, 2021		July 25, 2020			July 30, 2022		July 31, 2021
Operating activities:	Operating activities:					Operating activities:
Net income	Net income	$	33,802	$	24,202	Net income	$	24,260	$	33,802

Adjustments to reconcile net income to net cash used in operating activities:	Adjustments to reconcile net income to net cash used in operating activities:					Adjustments to reconcile net income to net cash used in operating activities:
Depreciation	Depreciation	10,977		10,562		Depreciation	10,827		10,977
Amortization	Amortization	9,541		9,305		Amortization	9,351		9,541

Gains on investments	Gains on investments	(87,827)		—		Gains on investments	—		(87,827)

Non-cash employee compensation	Non-cash employee compensation	7,839		9,583		Non-cash employee compensation	7,159		7,839

Non-cash losses (gains) and other, net	Non-cash losses (gains) and other, net	3,385		503		Non-cash losses (gains) and other, net	3,559		3,385

Change in assets and liabilities:	Change in assets and liabilities:					Change in assets and liabilities:
Receivables	Receivables	(206,199)		(153,113)		Receivables	(171,148)		(206,199)
Inventory	Inventory	(30,750)		118,630		Inventory	(91,124)		(30,750)
Accounts payable	Accounts payable	(15,974)		(317,032)		Accounts payable	(22,926)		(15,974)
Accrued liabilities	Accrued liabilities	208		48,521		Accrued liabilities	(60,061)		208

Other changes from operating activities, net	Other changes from operating activities, net	(38,423)		19,031		Other changes from operating activities, net	(12,436)		(38,423)

Net cash used in operating activities	Net cash used in operating activities	(313,421)		(229,808)		Net cash used in operating activities	(302,539)		(313,421)
Investing activities:	Investing activities:					Investing activities:
Additions to property and equipment	Additions to property and equipment	(7,717)		(6,439)		Additions to property and equipment	(14,554)		(7,717)
Collection of deferred purchase price receivables	Collection of deferred purchase price receivables	315,217		139,466		Collection of deferred purchase price receivables	252,909		315,217
Acquisitions, net of cash acquired	Acquisitions, net of cash acquired	(19,793)		—		Acquisitions, net of cash acquired	—		(19,793)
Sale of investments	Sale of investments	57,245		396		Sale of investments	—		57,245

Net cash provided by investing activities	Net cash provided by investing activities	344,952		133,423		Net cash provided by investing activities	238,355		344,952
Financing activities:	Financing activities:					Financing activities:
Dividends paid	Dividends paid	(25,138)		—		Dividends paid	(25,418)		(25,138)
Repurchases of common stock						Repurchases of common stock	(15,000)		—

(Payment) draw on revolving credit		(11,000)		136,000
Draw (payment) on revolving credit						Draw (payment) on revolving credit	116,000		(11,000)
Other financing activities	Other financing activities	(1,897)		(722)		Other financing activities	(2,142)		(1,897)
Net cash (used in) provided by financing activities		(38,035)		135,278
Net cash provided by (used in) financing activities						Net cash provided by (used in) financing activities	73,440		(38,035)
Effect of exchange rate changes on cash	Effect of exchange rate changes on cash	190		2,724		Effect of exchange rate changes on cash	(1,710)		190
Net change in cash and cash equivalents	Net change in cash and cash equivalents	(6,314)		41,617		Net change in cash and cash equivalents	7,546		(6,314)
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	143,244		77,944		Cash and cash equivalents at beginning of period	142,014		143,244
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	136,930	$	119,561	Cash and cash equivalents at end of period	$	149,560	$	136,930

Supplemental disclosure of non-cash investing activity:	Supplemental disclosure of non-cash investing activity:					Supplemental disclosure of non-cash investing activity:
Retained interest in securitization transactions	Retained interest in securitization transactions	$	286,607	$	201,861	Retained interest in securitization transactions	$	241,375	$	286,607

See accompanying notes

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PATTERSON COMPANIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars, except per share amounts, and shares in thousands)

(Unaudited)

Note 1. General

Basis of Presentation

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly the financial position of Patterson Companies, Inc. (referred to herein as "Patterson" or in the first person notations "we," "our," and "us") as of July ~~31, 2021,~~30, 2022, and our results of operations and cash flows for the periods ended July ~~31, 2021~~30, 2022 and July ~~25, 2020.~~31, 2021. Such adjustments are of a normal recurring nature. The results of operations for the three months ended July ~~31, 2021~~30, 2022 are not necessarily indicative of the results to be expected for any other interim period or for the year ending April ~~30, 2022.~~29, 2023. These financial statements should be read in conjunction with the financial statements included in our ~~2021~~2022 Annual Report on Form 10-K filed on June ~~23, 2021.~~29, 2022.

The unaudited condensed consolidated financial statements include the assets and liabilities of PDC Funding Company, LLC ("PDC Funding"), PDC Funding Company II, LLC ("PDC Funding II"), PDC Funding Company III, LLC ("PDC Funding III") and PDC Funding Company IV, LLC ("PDC Funding IV"), which are our wholly owned subsidiaries and separate legal entities formed under Minnesota law. PDC Funding and PDC Funding II are fully consolidated special purpose entities established to sell customer installment sale contracts to outside financial institutions in the normal course of their business. PDC Funding III and PDC Funding IV are fully consolidated special purpose ~~entity~~entities established to sell certain receivables to unaffiliated financial institutions. The assets of PDC Funding, PDC Funding II, PDC Funding III and PDC Funding IV would be available first and foremost to satisfy the claims of its creditors. There are no known creditors of PDC Funding, PDC Funding II, PDC Funding III or PDC Funding IV. The unaudited condensed consolidated financial statements also include the assets and liabilities of Technology Partner Innovations, LLC, which is further described in Note 8.7.

Fiscal Year End

We operate with a 52-53 week accounting convention with our fiscal year ending on the last Saturday in April. The first quarter of fiscal 2023 and 2022 represents the 13 weeks ended July 30, 2022 and ~~2021 represents~~ the 14 weeks ended July 31, 2021, ~~and the 13 weeks ended July 25, 2020,~~ respectively. Fiscal ~~2022~~2023 will include 5352 weeks and fiscal ~~2021~~2022 included 5253 weeks.

~~Gains on Investments~~

Other income (expense) in the condensed consolidated statements of operations and other comprehensive income includes gains on investments for the three months ended July 31, 2021 of $87,827, which consists of three components related to our investment in Vetsource. See Note 6 for further details.

Other Income, Net

Other income, net consisted of the following:


		Three Months Ended				Three Months Ended
		July 31, 2021		July 25, 2020				July 30, 2022		July 31, 2021
Loss on interest rate swap agreements	Loss on interest rate swap agreements	$	(1,187)	$	(1,195)		Loss on interest rate swap agreements	$	(1,948)	$	(1,187)
Investment income and other	Investment income and other	2,610		3,229			Investment income and other	3,728		2,610
Other income, net	Other income, net	$	1,423	$	2,034		Other income, net	$	1,780	$	1,423

Comprehensive Income

Comprehensive income is computed as net income including certain other items that are recorded directly to stockholders’ equity. Significant items included in comprehensive income are foreign currency translation adjustments and the effective portion of cash flow hedges, net of tax. Foreign currency translation adjustments do

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not include a provision for income tax because earnings from foreign operations are considered to be indefinitely reinvested outside the U.S. The income tax expense related to cash flow hedges was $80 and $80 for the three months ended July ~~31, 2021~~30, 2022 and July ~~25, 2020,~~31, 2021, respectively.

Earnings Per Share ("EPS")

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The following table sets forth the computation of the weighted average shares outstanding used to calculate basic and diluted EPS:


		Three Months Ended		Three Months Ended
		July 31, 2021	July 25, 2020			July 30, 2022	July 31, 2021
Denominator for basic EPS – weighted average shares	Denominator for basic EPS – weighted average shares	96,864	95,189		Denominator for basic EPS – weighted average shares	96,629	96,864
Effect of dilutive securities – stock options, restricted stock and stock purchase plans	Effect of dilutive securities – stock options, restricted stock and stock purchase plans	1,391	654		Effect of dilutive securities – stock options, restricted stock and stock purchase plans	1,165	1,391
Denominator for diluted EPS – weighted average shares	Denominator for diluted EPS – weighted average shares	98,255	95,843		Denominator for diluted EPS – weighted average shares	97,794	98,255

Potentially dilutive securities representing 877 shares for the three months ended July 30, 2022 and 628 shares for the three months ended July 31, 2021 ~~and 2,630 shares for the three months ended July 25, 2020~~ were excluded from the calculation of diluted EPS because their effects were anti-dilutive using the treasury stock method.

Revenue Recognition

Revenues are generated from the sale of consumable products, equipment and support, software and support, technical service parts and labor, and other sources. Revenues are recognized when or as performance obligations are satisfied. Performance obligations are satisfied when the customer obtains control of the goods or services.

Consumable, equipment, software and parts sales are recorded upon delivery, except in those circumstances where terms of the sale are FOB shipping point, in which case sales are recorded upon shipment. Technical service labor is recognized as it is provided. Revenue derived from equipment and software support is recognized ratably over the period in which the support is provided.

In addition to revenues generated from the distribution of consumable products under arrangements (buy/sell agreements) where the full market value of the product is recorded as revenue, we earn commissions for services provided under agency agreements. The agency agreement contrasts to a buy/sell agreement in that we do not have control over the transaction, as we do not have the primary responsibility of fulfilling the promise of the good or service and we do not bill or collect from the customer in an agency relationship. Commissions under agency agreements are recorded when the services are provided.

Estimates for returns, damaged goods, rebates, loyalty programs and other revenue allowances are made at the time the revenue is recognized based on the historical experience for such items. The receivables that result from the recognition of revenue are reported net of related allowances. We maintain a valuation allowance based upon the expected collectability of receivables held. Estimates are used to determine the valuation allowance and are based on several factors, including historical collection data, current and forecasted economic trends and credit worthiness of customers. Receivables are written off when we determine the amounts to be uncollectible, typically upon customer bankruptcy or non-response to continuous collection efforts. The portions of receivable amounts that are not expected to be collected during the next twelve months are classified as long-term.

Net sales do not include sales tax as we are considered a pass-through conduit for collecting and remitting sales tax.

Contract Balances

Contract balances represent amounts presented in our condensed consolidated balance sheets when either we have 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.

Contract asset balances as of July ~~31, 2021~~30, 2022 and April ~~24, 2021~~30, 2022 were ~~$3,816~~$378 and ~~$2,491,~~$134, respectively. Our contract liabilities primarily relate to advance payments from customers, upfront payments for software and support provided

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over time, and options that provide a material right to customers, such as our customer loyalty programs. At July ~~31, 2021~~30, 2022 and April ~~24, 2021,~~30, 2022, contract liabilities of ~~$26,838~~$41,587 and ~~$23,526~~$38,581 were reported in other accrued liabilities, respectively. During the three months ended July ~~31, 2021,~~30, 2022, we recognized ~~$7,848~~$14,203 of the amount previously deferred at April ~~24, 2021.~~30, 2022.

Recently Issued Accounting Pronouncements

~~In March 2020, the~~

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The Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” ~~and~~ in ~~January 2021 issued~~March 2020 and ASU No. 2021-01, “Reference Rate Reform (Topic 848): Scope”. in January 2021. These ASUs provide temporary optional expedients and exceptions to existing guidance on contract modifications and hedge accounting to facilitate the market transition from existing reference rates, such as LIBOR which ~~is being~~began to be phased out ~~beginning~~ at the end of 2021, to alternate reference rates. These standards were effective upon issuance. We are evaluating the optional relief guidance provided within these ASUs, and are reviewing our debt securities, derivative instruments and customer financing contracts that currently utilize LIBOR as the reference rate.

~~Reclassifications~~

~~Certain prior period amounts in the condensed consolidated statements of cash flows have been reclassified to conform to the current year presentation.~~

~~Note 2. Acquisitions~~

During the first quarter of fiscal 2022, we acquired substantially all of the assets of Miller Vet Holdings, LLC, a multiregional veterinary distributor, for total cash consideration of $19,793 and liabilities assumed of $6,395. We have included its results of operations in our financial statements since the date of acquisition within the Animal Health segment. This acquisition is expected to grow our presence in the companion animal market and drive increased operating leverage and synergies. The accounting for the acquisition is not complete because certain information and analysis that may impact our initial valuations are still being obtained or reviewed. As of July 31, 2021, we have recorded $14,000 of identifiable intangibles, $1,063 of goodwill, and net tangible assets of $4,730 in our condensed consolidated balance sheets related to this acquisition. The acquisition did not materially impact our financial statements, and therefore pro forma results are not provided.

Note 3.2. Receivables Securitization Program

We are party to certain receivables purchase agreements (the “Receivables Purchase Agreements”) with MUFG Bank, Ltd. ("MUFG") (f.k.a. The Bank of Tokyo-Mitsubishi UFJ, Ltd.), under which MUFG acts as an agent to facilitate the sale of certain Patterson receivables (the “Receivables”) to certain unaffiliated financial institutions (the “Purchasers”). The sale of these receivables is accounted for as a sale of assets under the provisions of ASC 860, Transfers and Servicing. We utilize PDC Funding III and PDC Funding IV to facilitate the sale to fulfill requirements within the agreement. We use a daily unit of account for these Receivables.

The proceeds from the sale of these Receivables comprise a combination of cash and a deferred purchase price (“DPP”) receivable. The DPP receivable is ultimately realized by Patterson following the collection of the underlying Receivables sold to the Purchasers. The amount available under the Receivables Purchase Agreements fluctuates over time based on the total amount of eligible Receivables generated during the normal course of business, with maximum availability of $200,000 as of July ~~31, 2021,~~30, 2022, of which $200,000 was utilized.

We have no retained interests in the transferred Receivables, other than our right to the DPP receivable and collection and administrative service fees. We consider the fees received adequate compensation for services rendered, and accordingly have recorded no servicing asset or liability. As of July ~~31, 2021~~30, 2022 and April ~~24, 2021,~~30, 2022, the fair value of outstanding trade receivables transferred to the Purchasers under the facility and derecognized from the condensed consolidated balance sheets were ~~$388,393~~$393,071 and ~~$384,950,~~$396,443, respectively. Sales of trade receivables under this facility were ~~$958,767~~$903,780 and ~~$711,088,~~$958,767, and cash collections from customers on receivables sold were ~~$955,378~~$907,112 and ~~$658,161~~$955,378 during the three months ended July ~~31, 2021~~30, 2022 and July ~~25, 2020,~~31, 2021, respectively.

The DPP receivable is recorded at fair value within the condensed consolidated balance sheets within prepaid expenses and other current assets. The difference between the carrying amount of the Receivables and the sum of the cash and fair value of the DPP receivable received at time of transfer is recognized as a gain or loss on sale of the related Receivables inclusive of bank fees and allowance for credit losses. In operating expenses in the

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condensed consolidated statements of operations and other comprehensive income, we recorded ~~a loss~~losses of ~~$721~~$1,435 and ~~$2,386~~$721 during the three months ended July ~~31, 2021~~30, 2022 and July ~~25, 2020,~~31, 2021, respectively, related to the Receivables.

The following rollforward summarizes the activity related to the DPP receivable:


		Three Months Ended						Three Months Ended
			July 31, 2021		July 25, 2020				July 30, 2022		July 31, 2021
Beginning DPP receivable balance	Beginning DPP receivable balance		$	183,999	$	117,327	Beginning DPP receivable balance		$	195,764	$	183,999
Non-cash additions to DPP receivable	Non-cash additions to DPP receivable		267,497		185,350		Non-cash additions to DPP receivable		227,291		267,497
Cash collections on DPP receivable			(264,075)		(147,114)
Collection of DPP receivable							Collection of DPP receivable		(230,780)		(264,075)
Ending DPP receivable balance	Ending DPP receivable balance		$	187,421	$	155,563	Ending DPP receivable balance		$	192,275	$	187,421

Note 4.3. Customer Financing

As a convenience to our customers, we offer several different financing alternatives, including a third party program and a Patterson-sponsored program. For the third party program, we act as a facilitator between the customer and the third party financing entity with no on-going involvement in the financing transaction. Under the Patterson-sponsored program, equipment purchased by creditworthy customers may be financed up to a maximum of $1,000. We generally sell our customers’ financing contracts to outside financial institutions in the normal course of our business. These financing arrangements are accounted for as a sale of assets under the provisions of ASC 860,

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Transfers and Servicing. We currently have 2two arrangements under which we sell these contracts. We use a monthly unit of account for these financing contracts.

First, we operate under an agreement to sell a portion of our equipment finance contracts to commercial paper conduits with MUFG serving as the agent. We utilize PDC Funding to fulfill a requirement of participating in the commercial paper conduit. We receive the proceeds of the contracts upon sale to MUFG. At least 15.0% of the proceeds are held by the conduit as security against eventual performance of the portfolio. This percentage can be greater and is based upon certain ratios defined in the agreement with MUFG. The capacity under the agreement with MUFG at July ~~31, 2021~~30, 2022 was $525,000.

Second, we maintain an agreement with Fifth Third Bank ("Fifth Third") whereby Fifth Third purchases customers’ financing contracts. PDC Funding II sells its financing contracts to Fifth Third. We receive the proceeds of the contracts upon sale to Fifth Third. At least 15.0% of the proceeds are held by the conduit as security against eventual performance of the portfolio. This percentage can be greater and is based upon certain ratios defined in the agreement with Fifth Third. The capacity under the agreement with Fifth Third at July ~~31, 2021~~30, 2022 was $100,000.

We service the financing contracts under both arrangements, for which we are paid a servicing fee. The servicing fees we receive are considered adequate compensation for services rendered. Accordingly, no servicing asset or liability has been recorded.

The portion of the purchase price for the receivables held by the conduits is deemed a DPP receivable, which is paid to the applicable special purpose entity as payments on the customers’ financing contracts are collected by Patterson from customers. The difference between the carrying amount of the receivables sold under these programs and the sum of the cash and fair value of the DPP receivable received at time of transfer is recognized as a gain on sale of the related receivables and recorded in net sales in the condensed consolidated statements of operations and other comprehensive income. Expenses incurred related to customer financing activities are recorded in operating expenses in our condensed consolidated statements of operations and other comprehensive income.

During the three months ended July 30, 2022 and July 31, 2021, ~~and July 25, 2020,~~ we sold ~~$73,043~~$73,612 and ~~$50,070~~$73,043 of contracts under these arrangements, respectively. In net sales in the condensed consolidated statements of operations and other comprehensive income, we recorded ~~a gain~~gains of ~~$73~~$988 and ~~a loss of $342~~$73 during the three months ended July ~~31, 2021~~30, 2022 and July ~~25, 2020,~~31, 2021, respectively, related to these contracts sold. Cash collections on financed receivables sold were ~~$108,111~~$84,094 and ~~$71,844~~$108,111 during the three months ended July ~~31, 2021~~30, 2022 and July ~~25, 2020,~~31, 2021, respectively.

Included in cash and cash equivalents in the condensed consolidated balance sheets are ~~$37,858~~$36,475 and ~~$36,771~~$39,106 as of July ~~31, 2021~~30, 2022 and April ~~24, 2021,~~30, 2022, respectively, which represent cash collected from previously sold customer

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financing contracts that have not yet been settled. Included in current receivables in the condensed consolidated balance sheets are ~~$19,070~~$14,266 and ~~$50,638~~$58,190 as of July ~~31, 2021~~30, 2022 and April ~~24, 2021,~~30, 2022, respectively, of finance contracts we have not yet sold. A total of ~~$618,332~~$569,347 of finance contracts receivable sold under the arrangements was outstanding at July ~~31, 2021.~~30, 2022. Since the internal financing program began in 1994, bad debt write-offs have amounted to less than 1% of the loans originated.

The following rollforward summarizes the activity related to the DPP receivable:


		Three Months Ended						Three Months Ended
			July 31, 2021		July 25, 2020				July 30, 2022		July 31, 2021
Beginning DPP receivable balance	Beginning DPP receivable balance		$	227,967	$	228,019	Beginning DPP receivable balance		$	125,332	$	227,967
Non-cash additions to DPP receivable	Non-cash additions to DPP receivable		19,110		16,511		Non-cash additions to DPP receivable		14,084		19,110
Cash (collections) payments on DPP receivable			(51,142)		7,648
Collection of DPP receivable							Collection of DPP receivable		(22,129)		(51,142)
Ending DPP receivable balance	Ending DPP receivable balance		$	195,935	$	252,178	Ending DPP receivable balance		$	117,287	$	195,935

The arrangements require us to maintain a minimum current ratio and maximum leverage ratio. We were in compliance with those covenants at July ~~31, 2021.~~30, 2022.

Note 5.4. Derivative Financial Instruments

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We are a party to certain offsetting and identical interest rate cap agreements entered into to fulfill certain covenants of the equipment finance contract sale agreements. The interest rate cap agreements also provide a credit enhancement feature for the financing contracts sold by PDC Funding and PDC Funding II to the commercial paper conduit.

The interest rate cap agreements are canceled and new agreements are entered into periodically to maintain consistency with the dollar maximum of the sale agreements and the maturity of the underlying financing contracts. As of July ~~31, 2021,~~30, 2022, PDC Funding had purchased an interest rate cap from a bank with a notional amount of $525,000 and a maturity date of August ~~2028.~~2029. We sold an identical interest rate cap to the same bank. As of July ~~31, 2021,~~30, 2022, PDC Funding II had purchased an interest rate cap from a bank with a notional amount of $100,000 and a maturity date of September ~~2028.~~2029. We sold an identical interest rate cap to the same bank.

These interest rate cap agreements do not qualify for hedge accounting treatment and, accordingly, we record the fair value of the agreements as an asset or liability and the change in fair value as income or expense during the period in which the change occurs.

In January 2014, we entered into a forward interest rate swap agreement with a notional amount of $250,000 and accounted for it as a cash flow hedge, in order to hedge interest rate fluctuations in anticipation of refinancing the 5.17% senior notes due March 25, 2015. These notes were repaid on March 25, 2015 and replaced with new $250,000 3.48% senior notes due March 24, 2025. A cash payment of $29,003 was made in March 2015 to settle the interest rate swap. This amount is recorded in other comprehensive income (loss), net of tax, and is recognized as interest expense over the life of the related debt.

We utilize forward interest rate swap agreements to hedge against interest rate fluctuations that impact the amount of net sales we record related to our customer financing contracts. These interest rate swap agreements do not qualify for hedge accounting treatment and, accordingly, we record the fair value of the agreements as an asset or liability and the change in fair value as income or expense during the period in which the change occurs.

As of April ~~24, 2021,~~30, 2022, the remaining notional amount for interest rate swap agreements was ~~$653,122,~~$574,144, with the latest maturity date in fiscal ~~2027.~~2029. During the three months ended July ~~31, 2021,~~30, 2022, we entered into forward interest rate swap agreements with a notional amount of ~~$47,456.~~$54,620. As of July ~~31, 2021,~~30, 2022, the remaining notional amount for interest rate swap agreements was ~~$622,148,~~$568,075, with the latest maturity date in fiscal ~~2029.~~2030.

Net cash payments of ~~$2,188~~$560 and ~~$2,828~~$2,188 were made during the three months ended July ~~31, 2021~~30, 2022 and July ~~25, 2020,~~31, 2021, respectively, to settle a portion of our liabilities related to interest rate swap agreements. These payments are reflected as cash outflows in the condensed consolidated statements of cash flows within net cash used in operating activities.

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The following presents the fair value of derivative instruments included in the condensed consolidated balance sheets:


Derivative type	Derivative type	Classification	July 31, 2021		April 24, 2021		Derivative type	Classification	July 30, 2022		April 30, 2022
Assets:	Assets:						Assets:
Interest rate contracts	Interest rate contracts	Prepaid expenses and other current assets	$	208	$	—	Interest rate contracts	Prepaid expenses and other current assets	$	3,669	$	3,875
Interest rate contracts	Interest rate contracts	Other non-current assets	1,321		2,120		Interest rate contracts	Other non-current assets, net	16,634		19,871
Total asset derivatives	Total asset derivatives		$	1,529	$	2,120	Total asset derivatives		$	20,303	$	23,746
Liabilities:	Liabilities:						Liabilities:
Interest rate contracts	Interest rate contracts	Other accrued liabilities	$	3,408	$	3,776	Interest rate contracts	Other accrued liabilities	$	300	$	250
Interest rate contracts	Interest rate contracts	Other non-current liabilities	6,241		7,795		Interest rate contracts	Other non-current liabilities	7,908		10,013
Total liability derivatives	Total liability derivatives		$	9,649	$	11,571	Total liability derivatives		$	8,208	$	10,263

The following tables present the pre-tax effect of derivative instruments on the condensed consolidated statements of operations and other comprehensive income:

Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion)
Three Months Ended
Derivatives in cash flow hedging relationships Statements of operations location July 31, 2021 July 25, 2020
Interest rate contracts Interest expense $ (341) $ (340)

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Amount of Gain (Loss) Recognized in Income on Derivatives

Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income (Effective Portion)

Three Months Ended

Derivatives not designated as hedging instruments

Statements of operations location

July 31, 2021

July 25, 2020

Derivatives in cash flow hedging relationships

Statements of operations location

July 30, 2022

July 31, 2021

Interest rate contracts

Other income, net

(1,187)

(1,195)

Interest rate contracts

Interest expense

(341)

Amount of Gain (Loss) Recognized in Income on Derivatives

Three Months Ended

Derivatives not designated as hedging instruments

Statements of operations location

July 30, 2022

July 31, 2021

Interest rate contracts

Other income, net

(1,948)

(1,187)

There were no gains or losses recognized in other comprehensive income (loss) on cash flow hedging derivatives during the three months ended July ~~31, 2021~~30, 2022 or July ~~25, 2020.~~31, 2021.

We recorded no ineffectiveness during the three month periods ended July ~~31, 2021~~30, 2022 and July ~~25, 2020.~~31, 2021. As of July ~~31, 2021,~~30, 2022, the estimated pre-tax portion of accumulated other comprehensive loss that is expected to be reclassified into earnings over the next twelve months is $1,363, which will be recorded as an increase to interest expense.

Note 6.5. Fair Value Measurements

Fair value is the price at which an asset could be exchanged in a current transaction between knowledgeable, willing parties. The fair value hierarchy of measurements is categorized into one of three levels based on the lowest level of significant input used:

Level 1 - Quoted prices in active markets for identical assets and liabilities at the measurement date.

Level 2 - Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3 - Unobservable inputs for which there is little or no market data available. These inputs reflect management’s assumptions of what market participants would use in pricing the asset or liability.

Our hierarchy for assets and liabilities measured at fair value on a recurring basis is as follows:


	July 30, 2022
	Total		Level 1		Level 2		Level 3
Assets:
Cash equivalents	$	4,210	$	4,210	$	—	$	—
DPP receivable - receivables securitization program	192,275		—		—		192,275
DPP receivable - customer financing	117,287		—		—		117,287
Derivative instruments	20,303		—		20,303		—
Total assets	$	334,075	$	4,210	$	20,303	$	309,562
Liabilities:
Derivative instruments	$	8,208	$	—	$	8,208	$	—

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July 31, 2021
Total Level 1 Level 2 Level 3
Assets:
Cash equivalents $ 3,581 $ 3,581 $ — $ —
DPP receivable - receivables securitization program 187,421 — — 187,421
DPP receivable - customer financing 195,935 — — 195,935
Derivative instruments 1,529 — 1,529 —
Total assets $ 388,466 $ 3,581 $ 1,529 $ 383,356
Liabilities:
Derivative instruments $ 9,649 $ — $ 9,649 $ —


		April 24, 2021									April 30, 2022
		Total		Level 1		Level 2		Level 3			Total		Level 1		Level 2		Level 3
Assets:	Assets:									Assets:
Cash equivalents	Cash equivalents	$	1,698	$	1,698	$	—	$	—	Cash equivalents	$	3,186	$	3,186	$	—	$	—
DPP receivable - receivables securitization program	DPP receivable - receivables securitization program	183,999		—		—		183,999		DPP receivable - receivables securitization program	195,764		—		—		195,764
DPP receivable - customer financing	DPP receivable - customer financing	227,967		—		—		227,967		DPP receivable - customer financing	125,332		—		—		125,332
Derivative instruments	Derivative instruments	2,120		—		2,120		—		Derivative instruments	23,746		—		23,746		—
Total assets	Total assets	$	415,784	$	1,698	$	2,120	$	411,966	Total assets	$	348,028	$	3,186	$	23,746	$	321,096
Liabilities:	Liabilities:									Liabilities:
Derivative instruments	Derivative instruments	$	11,571	$	—	$	11,571	$	—	Derivative instruments	$	10,263	$	—	$	10,263	$	—

Cash equivalents – We value cash equivalents at their current market rates. The carrying value of cash equivalents approximates fair value and maturities are less than three months.

DPP receivable - receivables securitization program – We value this DPP receivable based on a discounted cash flow analysis using unobservable inputs, which include the estimated timing of payments and the credit quality of the underlying creditor. Significant changes in any of the significant unobservable inputs in isolation would not result in a materially different fair value estimate. The interrelationship between these inputs is insignificant.

DPP receivable - customer financing – We value this DPP receivable based on a discounted cash flow analysis using unobservable inputs, which include a forward yield curve, the estimated timing of payments and the credit quality of the underlying creditor. Significant changes in any of the significant unobservable inputs in isolation would not result in a materially different fair value estimate. The interrelationship between these inputs is insignificant.

Derivative instruments – Our derivative instruments consist of interest rate cap agreements and interest rate swaps. These instruments are valued using inputs such as interest rates and credit spreads.

Certain assets are measured at fair value on a non-recurring basis. These assets are not measured at fair value on an ongoing basis, but are subject to fair value adjustments under certain circumstances. We adjust the carrying value of our non-marketable equity securities to fair value when observable transactions of identical or similar securities occur, or due to an impairment.

During the three months ended July 31, 2021, we sold a portion of our investment in Vetsource, a commercial partner and leading home delivery provider for veterinarians, with a carrying value of $25,814 for $56,849. We recorded a pre-tax gain of $31,035 in gains on investments in our condensed consolidated statements of operations and other comprehensive income as a result of this ~~sale.~~sale in the first quarter of fiscal 2022. The cash received of $56,849 is reported within investing activities in our condensed consolidated statements of cash flows. During the three months ended July 31, 2021, we also recorded a pre-tax non-cash gain of $31,035 to reflect the increase in the carrying value of the remaining portion of our investment in Vetsource, which was based on the selling price of the portion of the investment we sold for $56,849. This gain was recorded in gains on investments in our condensed consolidated statements of operations and other comprehensive income. The carrying value of the investment we owned following this sale was $56,849 and ~~$25,814~~$56,849 as of July ~~31, 2021~~30, 2022 and April ~~25, 2021,~~30, 2022, respectively. Concurrent with the sale completed in the first quarter of fiscal 2022, we obtained rights that will allow us, under certain circumstances, to require

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another shareholder of Vetsource to purchase our remaining shares. We recorded a pre-tax non-cash gain of $25,757 in gains on investments in our condensed consolidated statements of operations and other comprehensive income as a result of this transaction. The carrying value of this put option as of July ~~31, 2021~~30, 2022 is $25,757, and is reported within investments in our condensed consolidated balance sheets. The aggregate gains on investments of $87,827 are reported within operating activities in our condensed consolidated statements of cash flows. Concurrent with obtaining this put option, we also granted rights to the same Vetsource shareholder that would allow such shareholder, under certain circumstances, to require us to sell our remaining shares at fair value. There were no fair value adjustments to such assets during the three months ended July ~~25, 2020.~~30, 2022.

Our debt is not measured at fair value in the condensed consolidated balance sheets. The estimated fair value of our debt as of July ~~31, 2021~~30, 2022 and April ~~24, 2021~~30, 2022 was ~~$609,856~~$488,507 and ~~$610,811,~~$489,777, respectively, as compared to a carrying value of ~~$588,568~~$488,809 and ~~$588,295~~$488,554 at July ~~31, 2021~~30, 2022 and April ~~24, 2021,~~30, 2022, respectively. The fair value of debt was measured using a discounted cash flow analysis based on expected market based yields (i.e., Level 2 inputs).

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The carrying amounts of receivables, net of allowances, accounts payable, and certain accrued and other current liabilities approximated fair value at July ~~31, 2021~~30, 2022 and April ~~24, 2021.~~30, 2022.

Note 7.6. Income Taxes

The effective income tax rate for the three months ended July ~~31, 2021~~30, 2022 was ~~24.1%~~21.9% compared to ~~27.1%~~24.1% for the three months ended July ~~25, 2020.~~31, 2021. The decrease in the rate for the three months ended July 30, 2022 was primarily due to the impact of excess tax benefit deductions ~~associated with stock-based compensation awards.~~and a geographical shift in earnings.

Note 8.7. Technology Partner Innovations, LLC ("TPI")

In fiscal 2019, we entered into an agreement with Cure Partners to form TPI, which offers a cloud-based practice management software, NaVetor, to its customers. Patterson and Cure Partners each contributed net assets of $4,000 to form TPI. Patterson and Cure Partners each contributed additional net assets of $1,000 during the fiscal year ended April 30, 2022 and $500 during the three months ended July 30, 2022 . We have determined that TPI is a variable interest entity, and we consolidate the results of operations of TPI as we have concluded that we are the primary beneficiary of TPI. During the three months ended July ~~31, 2021~~30, 2022 and July ~~25, 2020,~~31, 2021, net loss attributable to the noncontrolling interest was $330 and $194, ~~and $205, respectively, resulting~~respectively. Since TPI was formed, there have been no changes in ownership interests. As of July 30, 2022, we had noncontrolling interests of ~~$1,261~~$1,129 on ~~the~~our condensed consolidated balance ~~sheets at July 31, 2021.~~sheets.

Note 9.8. Segment and Geographic Data

We present 3three reportable segments: Dental, Animal Health and Corporate. Dental and Animal Health are strategic business units that offer similar products and services to different customer bases. Dental provides a virtually complete range of consumable dental products, equipment and software, turnkey digital solutions and value-added services to dentists, dental laboratories, institutions, and other healthcare professionals throughout North America. Animal Health is a leading, full-line distributor in North America and the U.K. of animal health products, services and technologies to both the production-animal and companion-pet markets. Our Corporate segment is comprised of general and administrative expenses, including home office support costs in areas such as information technology, finance, legal, human resources and facilities. In addition, customer financing and other miscellaneous sales are reported within Corporate results. Corporate assets consist primarily of cash and cash equivalents, accounts receivable, property and equipment and long-term receivables. We evaluate segment performance based on operating income. The costs to operate the fulfillment centers are allocated to the operating units based on the through-put of the unit.

The following tables present information about our reportable segments:

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		Three Months Ended				Three Months Ended
		July 31, 2021		July 25, 2020				July 30, 2022		July 31, 2021
Consolidated net sales	Consolidated net sales						Consolidated net sales
United States	United States	$	1,313,772	$	1,034,872		United States	$	1,260,398	$	1,313,772
United Kingdom	United Kingdom	192,747		149,392			United Kingdom	162,221		192,747
Canada	Canada	108,357		61,573			Canada	100,646		108,357
Total	Total	$	1,614,876	$	1,245,837		Total	$	1,523,265	$	1,614,876
Dental net sales	Dental net sales						Dental net sales
United States	United States	$	541,073	$	397,460		United States	$	499,835	$	541,073
Canada	Canada	65,794		32,835			Canada	58,082		65,794
Total	Total	$	606,867	$	430,295		Total	$	557,917	$	606,867
Animal Health net sales	Animal Health net sales						Animal Health net sales
United States	United States	$	767,480	$	634,023		United States	$	755,585	$	767,480
United Kingdom	United Kingdom	192,747		149,392			United Kingdom	162,221		192,747
Canada	Canada	42,563		28,738			Canada	42,564		42,563
Total	Total	$	1,002,790	$	812,153		Total	$	960,370	$	1,002,790
Corporate net sales	Corporate net sales						Corporate net sales
United States	United States	$	5,219	$	3,389		United States	$	4,978	$	5,219
Total	Total	$	5,219	$	3,389		Total	$	4,978	$	5,219

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		Three Months Ended				Three Months Ended
		July 31, 2021		July 25, 20201				July 30, 2022		July 31, 2021
Consolidated net sales	Consolidated net sales						Consolidated net sales
Consumable	Consumable	$	1,341,674	$	1,044,981		Consumable	$	1,261,769	$	1,341,674
Equipment and software	Equipment and software	183,452		129,431			Equipment and software	173,935		183,452
Value-added services and other	Value-added services and other	89,750		71,425			Value-added services and other	87,561		89,750
Total	Total	$	1,614,876	$	1,245,837		Total	$	1,523,265	$	1,614,876
Dental net sales	Dental net sales						Dental net sales
Consumable	Consumable	$	376,576	$	256,603		Consumable	$	337,840	$	376,576
Equipment and software	Equipment and software	156,966		113,017			Equipment and software	146,510		156,966
Value-added services and other	Value-added services and other	73,325		60,675			Value-added services and other	73,567		73,325
Total	Total	$	606,867	$	430,295		Total	$	557,917	$	606,867
Animal Health net sales	Animal Health net sales						Animal Health net sales
Consumable	Consumable	$	965,098	$	788,378		Consumable	$	923,929	$	965,098
Equipment and software	Equipment and software	26,486		16,414			Equipment and software	27,425		26,486
Value-added services and other	Value-added services and other	11,206		7,361			Value-added services and other	9,016		11,206
Total	Total	$	1,002,790	$	812,153		Total	$	960,370	$	1,002,790
Corporate net sales	Corporate net sales						Corporate net sales
Value-added services and other	Value-added services and other	$	5,219	$	3,389		Value-added services and other	$	4,978	$	5,219
Total	Total	$	5,219	$	3,389		Total	$	4,978	$	5,219

1 ~~Certain sales were reclassified between categories to conform to the current period presentation.~~


	Three Months Ended
	July 30, 2022		July 31, 2021





Operating income (loss)
Dental	$	36,895	$	(1,086)
Animal Health	21,859		23,805
Corporate	(23,910)		(62,248)
Total	$	34,844	$	(39,529)

Three Months Ended
July 31, 2021 July 25, 2020
Operating (loss) income
Dental $ (1,086) $ 37,769
Animal Health 23,805 17,399
Corporate (62,248) (17,296)
Consolidated operating (loss) income $ (39,529) $ 37,872


		July 31, 2021		April 24, 2021			July 30, 2022		April 30, 2022
Total assets	Total assets					Total assets
Dental	Dental	$	852,723	$	863,718	Dental	$	887,774	$	851,746
Animal Health	Animal Health	1,437,115		1,391,892		Animal Health	1,502,113		1,459,450
Corporate	Corporate	461,011		495,901		Corporate	368,481		430,434
Total assets		$	2,750,849	$	2,751,511
Total						Total	$	2,758,368	$	2,741,630

Note ~~10.~~9. Accumulated Other Comprehensive Loss ("AOCL")

The following table summarizes the changes in AOCL as of July ~~31, 2021:~~30, 2022:

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		Cash Flow Hedges		Currency Translation Adjustment		Total			Cash Flow Hedges		Currency Translation Adjustment		Total
AOCL at April 24, 2021		$	(4,496)	$	(58,096)	$	(62,592)
AOCL at April 30, 2022								AOCL at April 30, 2022	$	(3,454)	$	(78,062)	$	(81,516)
Other comprehensive income before reclassifications	Other comprehensive income before reclassifications	—		324		324		Other comprehensive income before reclassifications	—		(4,991)		(4,991)
Amounts reclassified from AOCL	Amounts reclassified from AOCL	261		—		261		Amounts reclassified from AOCL	261		—		261
AOCL at July 31, 2021		$	(4,235)	$	(57,772)	$	(62,007)
AOCL at July 30, 2022								AOCL at July 30, 2022	$	(3,193)	$	(83,053)	$	(86,246)

The amounts reclassified from AOCL during the three months ended July ~~31, 2021~~30, 2022 include gains and losses on cash flow hedges, net of taxes of $80. The impact to the condensed consolidated statements of operations and other comprehensive income was an increase to interest expense of $341 for the three months ended July ~~31, 2021.~~30, 2022.

Note ~~11.~~10. Legal Proceedings

From time to time, we become involved in lawsuits, administrative proceedings, government subpoenas, and government investigations (which may, in some cases, involve our entering into settlement agreements or consent decrees), relating to antitrust, commercial, environmental, product liability, intellectual property, regulatory, employment discrimination, securities, and other matters, including matters arising out of the ordinary course of business. The results of any such proceedings cannot be predicted with certainty because such matters are inherently uncertain. Significant damages or penalties may be sought in some matters, and some matters may require years to resolve. We also may be subject to fines or penalties, and equitable remedies (including but not limited to the suspension, revocation or non-renewal of licenses).

We accrue for these matters when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Unless otherwise noted, with respect to the specific legal proceedings and claims described below, the amount or range of possible losses is not reasonably estimable. Adverse outcomes in some or all of these matters may result in significant monetary damages or injunctive relief against us that could adversely affect our ability to conduct our business. There also exists the possibility of a material adverse effect on our financial statements for the period in which the effect of an unfavorable outcome becomes probable and reasonably estimable.

On March 28, 2018, Plymouth County Retirement System (“Plymouth”) filed a federal securities class action complaint against Patterson Companies, Inc. and its former CEO Scott P. Anderson and former CFO Ann B. Gugino in the U.S. District Court for the District of Minnesota in a case captioned Plymouth County Retirement System v. Patterson Companies, Inc., Scott P. Anderson and Ann B. Gugino, Case No. 0:18-cv-00871 MJD/SER. On November 9, 2018, the complaint was amended to add former CEO James W. Wiltz and former CFO R. Stephen Armstrong as individual defendants. Under the amended complaint, on behalf of all persons or entities that purchased or otherwise acquired Patterson’s common stock between June 26, 2013 and February 28, 2018, Plymouth ~~alleges~~alleged that Patterson violated federal securities laws by failing to disclose that Patterson’s revenue and earnings were “artificially inflated by Defendants’ illicit, anti-competitive scheme with its purported competitors, Benco and Schein, to prevent the formation of buying groups that would allow its customers who were office-based practitioners to take advantage of pricing arrangements identical or comparable to those enjoyed by large-group customers.” In its class action complaint, Plymouth ~~asserts 1~~asserted one count against Patterson for violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder and a second, related count against the individual defendants for violating Section 20(a) of the Exchange Act. Plymouth ~~seeks~~sought compensatory damages, pre- and post-judgment interest and reasonable attorneys’ fees and experts’ witness fees and costs. On August 30, 2018, Gwinnett County Public Employees Retirement System and Plymouth County Retirement System, Pembroke Pines Pension Fund for Firefighters and Police Officers, Central Laborers Pension Fund were appointed lead plaintiffs. On January 18, 2019, Patterson and the individual defendants filed a motion to dismiss the amended complaint. On July 25, 2019, the U.S. Magistrate Judge issued a report and recommendation that the motion to dismiss be granted in part and denied in part. The report and recommendation, among other things, recommended the dismissal of all claims against individual defendants Ann B. Gugino, R. Stephen Armstrong and James W. Wiltz. On September 10, 2019, the District Court adopted the Magistrate Judge’s report and recommendation. On September 28, 2020, the District Court granted plaintiffs’ motion to certify the class, appoint class representatives and appoint class counsel. On October 12, 2020, Patterson and the remaining individual defendant, Mr. Anderson, filed a Rule 23(f) petition for interlocutory appeal of the class certification order with the Eighth Circuit Court of Appeals in which the defendants sought clarification of the standard for rebutting the Basic presumption of class-wide reliance in securities class actions. On October 13, 2020, Patterson and Mr. Anderson filed a motion to stay

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the underlying proceeding with the District Court pending the possibility of interlocutory appeal. On November 9, 2020, the District Court denied defendants’ motion to stay and on November 12, 2020, the Eighth Circuit Court of Appeals denied defendants’ Rule 23(f) petition. On May 17, 2021, Patterson and Mr. Anderson filed a motion for summary judgment and a motion to exclude plaintiff's expert. On August 27, 2021, we signed a memorandum of understanding to settle this case. Under the terms of the settlement, Patterson ~~will~~agreed to pay $63,000 to resolve the case. Although we have agreed to settle this matter, we expressly deny the allegations of the complaint and all liability. Our insurers ~~have~~ consented to the settlement and ~~are expected to contribute~~contributed an aggregate of $35,000 to fund the settlement and to reimburse us for certain costs and expenses of the litigation. As a result of the foregoing, we recorded a pre-tax reserve of $63,000 in other accrued liabilities in the condensed consolidated balance sheets in our Corporate segment during the first quarter of fiscal 2022 related to the probable settlement of this litigation. During the first quarter of fiscal 2022, we also recorded a receivable of $27,000 in prepaid expenses and other current assets in the condensed consolidated balance sheets in our Corporate segment related to probable insurance recoveries, which amount ~~we have negotiated to be~~was paid into the litigation settlement escrow as required by the memorandum of understanding. The net expense of $36,000 was recorded in operating expenses in our condensed consolidated statements of operations and other comprehensive income. We ~~expect to record~~recorded a gain of $8,000 during the second quarter of fiscal 2022 in our Corporate segment to account for ~~expected~~our receipt of carrier reimbursement of previously expended fees and ~~costs, which reimbursement we expect to receive~~costs. The parties filed a stipulation of settlement during the second quarter of fiscal 2022. ~~The~~On February 3, 2022, the District Court entered an order preliminarily approving the settlement ~~is subject~~and directing the claims administrator to ~~court approval of~~mail a ~~stipulation~~notice of settlement and claim form to ~~be drafted by~~all class members. On June 9, 2022, the ~~parties.~~

On October 1, 2018, Sally Pemberton filed a stockholder derivative complaint against Patterson Companies, Inc., as a nominal defendant, and the following former and current officers and directors of Patterson: Scott Anderson, Ann Gugino, Mark Walchirk, John Buck, Alex Blanco, Jody Feragen, Sarena Lin, Ellen Rudnick, Neil Schrimsher, Les Vinney, James Wiltz, Paul Guggenheim, David Misiak and Tim Rogan as individual defendants in the U.S. District Court ~~for~~held a final settlement hearing to determine whether the settlement should be approved. On June 10, 2022, the District of Minnesota in a case captioned Sally Pemberton v. Scott P. Anderson, et al., Case No. 18-CV-2818 (PJS/HB). Derivatively on behalf of Patterson, plaintiff alleges that Patterson, with Benco and Henry Schein, “engage[d] in a conspiracy in restraint of trade, whereby the companies agreed to refuse to offer discounted prices or otherwise negotiate with GPOs, agreed to fix margins on dental supplies and equipment, agreed not to poach one another’s customers or sales representatives, and agreed to block the entry and expansion of rival distributors." Plaintiff further alleges that the individual defendants failed to disclose Patterson’s alleged “antitrust misconduct”Court entered an order granting final approval to the public and purportedly caused Patterson to repurchase $412,800 of its own stock at prices that were artificially inflated. In the derivative complaint, plaintiff asserts 6 counts against the individual defendants for: (i) breach of fiduciary duty; (ii) waste of corporate assets; (iii) unjust enrichment; (iv) violations of Section 14(a) of the Exchange Act; (v) violations of Section 10(b) and Rule 10b-5 of the Exchange Act and (vi) violations of Section 20(a) of the Exchange Act. Plaintiff seeks compensatory damages with pre-judgment and post-judgment interest, costs, disbursements and reasonable attorneys’ fees, experts’ fees, costs and expenses, and an order awarding restitution from the individual defendants and directing Patterson “to take all necessary actions to reform and improve its corporate governance and internal procedures.” On September 10, 2019, the Honorable Patrick J. Schiltz dismissed this action without prejudice because the plaintiff failed to make a pre-suit demand on Patterson’s Board of Directors. On October 31, 2019, Patterson’s Board received a written demand to initiate litigation against its officers and directors based on the claims Ms. Pemberton originally presented in her complaint. Following this demand, and after consultation with legal counsel, effective March 16, 2020, the Board adopted a resolution appointing Professor John Matheson and The Honorable George McGunnigle, retired Judge of Hennepin County District Court, as a special litigation committee pursuant to Minnesota Statutes Section 302A.241. Pursuant to the resolution, the special litigation committee has complete power and authority to investigate the demand, analyze the legal rights or remedies of Patterson, determine whether those rights or remedies should be pursued, and respond to Ms. Pemberton on behalf of Patterson.

On August 28, 2018, Kirsten Johnsen filed a stockholder derivative complaint against Patterson Companies, Inc., as a nominal defendant, and the following former and current officers and directors of Patterson: Scott Anderson, Ann Gugino, James Wiltz, John Buck, Jody Feragen, Ellen Rudnick, Les Vinney, Neil Schrimsher, Sarena Lin, Harold Slavkin, Alex Blanco and Mark Walchirk as individual defendants in Hennepin County District Court in a case captioned Kirsten Johnsen v. Scott P. Anderson et al., Case No. 27-CV-18-14315. Derivatively on behalf of Patterson, plaintiff alleges that Patterson “suppressed price competition and maintained supracompetitive prices for dental supplies and equipment by entering into agreements with Henry Schein and Benco to: (i) fix margins for dental supplies and equipment; and (ii) block the entry and expansion of lower-margin, lower-priced, rival dental distributors through threatened and actual group boycotts.” Plaintiff further alleges that the individual defendants failed to disclose Patterson’s alleged “price-fixing scheme” to the public and purportedly “caused Patterson to repurchase over $412,800 worth of its own stock at artificially inflated prices.” In the derivative complaint, plaintiff

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asserts 3 counts against the individual defendants for: (i) breach of fiduciary duty; (ii) waste of corporate assets; and (iii) unjust enrichment. Plaintiff seeks compensatory damages, equitable and injunctive relief as permitted by law, costs, disbursements and reasonable attorneys’ fees, accountants’ fees and experts’ fees, costs and expenses, and an order awarding restitution from the individual defendants and directing Patterson “to take all necessary actions to reform and improve its corporate governance and internal procedures.” On February 19, 2019, the Hennepin County District Court ordered this litigation stayed pending resolution of the above-described case brought by Sally Pemberton. On September 10, 2019, the Honorable Patrick J. Schiltz dismissed ~~Pemberton~~ without prejudice because the plaintiff failed to make a pre-suit demand on Patterson’s Board of Directors. On November 5, 2019, the defendants in Johnsen moved to dismiss such action based on plaintiff’s failure to make a pre-suit demand or otherwise properly plead demand futility. On December 12, 2019, in light of the outcome in ~~Pemberton, the defendants and Johnsen entered into a stipulation for voluntary dismissal of the~~ ~~Johnsen~~ action, which the court granted on December 13, 2019. On April 27, 2020, Patterson’s Board received a written demand to initiate litigation against its officers and directors based on the claims Ms. Johnsen originally presented in her complaint. Effective June 30, 2020, the Board adopted a resolution expanding the scope of the previously constituted special litigation committee to include this matter. Pursuant to the resolution, the special litigation committee has complete power and authority to investigate the demand, analyze the legal rights or remedies of Patterson, determine whether those rights or remedies should be pursued, and respond to Ms. Johnsen on behalf of Patterson.

On October 27, 2020, Patterson’s Board received a written demand from Matthew Davis to undertake an independent investigation and take action to remedy alleged breaches of fiduciary duties by the following current and former directors and officers of Patterson: John Buck, Scott Anderson, Stephen Armstrong, Ann Gugino, Mark Walchirk, Alex Blanco, Jody Feragen, Sarena Lin, Ellen Rudnick, Neil Schrimsher, Les Vinney, James Wiltz, Paul Guggenheim, David Misiak, Harold Slavkin and Tim Rogan. The demand arises from the allegations that Patterson (a) conspired with Henry Schein and Benco over a multi-year period to boycott GPOs and fix dental supply prices; and (b) issued a series of materially false and misleading statements in connection with such scheme. The demand seeks the institution of an action for breach of fiduciary duty and appropriate remedial measures, including obtaining damages from all persons unjustly enriched. Effective November 20, 2020, Patterson’s Board adopted a resolution expanding the scope of the previously constituted special litigation committee to include this matter. Pursuant to the resolution, the special litigation committee has complete power and authority to investigate the demand, analyze the legal rights or remedies of Patterson, determine whether those rights or remedies should be pursued, and respond to Mr. Davis on behalf of Patterson.settlement.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

The U.S. Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements to encourage companies to provide prospective information, so long as those statements are identified as forward-looking and are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those disclosed in the statement.

This Form 10-Q contains certain “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, including statements regarding future financial performance, and the objectives and expectations of management. Forward-looking statements often include words such as “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “seeks” or words of similar meaning, or future or conditional verbs, such as “will,” “should,” “could” or “may.” Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions.

Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not place undue reliance on any of these forward-looking statements.

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Any number of factors could affect our actual results and cause such results to differ materially from those contemplated by any forward-looking statements, including, but not limited to, the following: the COVID-19 pandemic and measures taken in response thereto; uncertain macro-economic conditions, including inflationary pressures; our dependence on relationships with sales representatives and service technicians to retain customers and develop business; potential disruption of distribution capabilities, including service issues with third-party shippers; our dependence on suppliers to manufacture and supply substantially all of the products we sell; the risk of the products we sell becoming obsolete or containing undetected errors; adverse changes in supplier ~~rebates;~~rebates or other purchasing incentives; the risk that private label sales could adversely affect our relationships with suppliers; our dependence on positive perceptions of Patterson’s reputation; risks inherent in acquiring and disposing of assets or other businesses and the risks inherent in integrating acquired businesses; our ability to comply with restrictive covenants in our credit agreement; ~~our dependence on leadership development and succession planning;~~turnover or loss of key personnel or highly skilled employees; the risk that our governing documents and Minnesota law may discourage takeovers and business combinations; risks

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related to climate change; the effects of the highly competitive and consolidating dental and animal health supply markets in which we compete; exposure to the risks of the animal production business, including changing consumer demand, the cyclical livestock market, and other factors outside our ~~control;~~control, and the risks of the companion animal business, including the possibility of disease adversely affecting the pet population; risks from the formation or expansion of GPOs, provider networks and buying groups that may shift purchasing decisions and place us at a competitive disadvantage; increases in over-the-counter sales and e-commerce options for companion animal products or sales of companion animal products from non-veterinarian sources; change and uncertainty in the health care ~~industry, including the effects of health care reform;~~industry; failure to comply with existing or future U.S. or foreign laws and regulations including those governing the distribution of pharmaceuticals and controlled substances; ~~public concern over the abuse of opioid medication in the U.S.;~~ failure to comply with health care fraud or other laws and regulations; litigation risks, including the diversion of management’s attention, the cost of defending against such actions, the possibility of damage awards or settlements, fines or penalties, or equitable remedies (including but not limited to the revocation of or non-renewal of licenses) and inherent uncertainty; failure to comply with evolving data privacy laws and regulations; tax legislation; the risks inherent in international operations, including currency fluctuations; and risks associated with information systems, software products and cyber-security attacks; disruptions from our enterprise resource planning system; and the risk of being required to record significant impairment charges if our Dental segment’s goodwill or other intangible assets become impaired.attacks.

The order in which these factors appear should not be construed to indicate their relative importance or priority. We caution that these factors may not be exhaustive, accordingly, any forward-looking statements contained herein should not be relied upon as a prediction of actual results.

You should carefully consider these and other relevant factors, including those risk factors in Part I, Item 1A, (“Risk Factors”) in our most recent Form 10-K, and information which may be contained in our other filings with the U.S. Securities and Exchange Commission, or SEC, when reviewing any forward-looking statement.

Investors should understand it is impossible to predict or identify all such factors or risks. As such, you should not consider the foregoing list, or the risks identified in our SEC filings, to be a complete discussion of all potential risks or uncertainties.

Any forward-looking statement made in this Form 10-Q is based only on information currently available to us and speaks only as of the date on which it is made. We do not undertake any obligation to release publicly any revisions to any forward-looking statements whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

OVERVIEW

Our financial information for the first three months of fiscal ~~2022~~2023 is summarized in this Management’s Discussion and Analysis and the Condensed Consolidated Financial Statements and related Notes. The following background is provided to readers to assist in the review of our financial information.

We present three reportable segments: Dental, Animal Health and Corporate. Dental and Animal Health are strategic business units that offer similar products and services to different customer bases. Dental provides a virtually complete range of consumable dental products, equipment and software, turnkey digital solutions and value-added services to dentists and dental laboratories throughout North America. Animal Health is a leading, full-line distributor in North America and the U.K. of animal health products, services and technologies to both the production-animal and companion-pet markets. Our Corporate segment is comprised of general and administrative expenses, including home office support costs in areas such as information technology, finance, legal, human resources and facilities. In addition, customer financing and other miscellaneous sales are reported within Corporate results.

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Operating margins of the animal health business are lower than the dental business. While operating expenses run at a lower rate in the animal health business when compared to the dental business, gross margins in the animal health business are lower due generally to the low margins experienced on the sale of pharmaceutical products.

We operate with a 52-53 week accounting convention with our fiscal year ending on the last Saturday in April. The first quarter of fiscal 2023 and 2022 represents the 13 weeks ended July 30, 2022 and ~~2021 represent~~ the 14 weeks ended July 31, 2021, ~~and the 13 weeks ended July 25, 2020,~~ respectively. Fiscal ~~2022~~2023 will include 5352 weeks and fiscal ~~2021~~2022 included 5253 weeks.

We believe there are several important aspects of our business that are useful in analyzing it, including: (1) growth in the various markets in which we operate; (2) internal growth; (3) growth through acquisition; and (4) continued focus on controlling costs and enhancing efficiency. Management defines internal growth as net sales adjusted to exclude the impact of foreign currency ~~changes in product selling relationships, contributions from recent acquisitions~~ and differences in the number of weeks in fiscal periods. Foreign currency

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impact represents the difference in results that is attributable to fluctuations in currency exchange rates the company uses to convert results for all foreign entities where the functional currency is not the U.S. dollar. The company calculates the impact as the difference between the current period results translated using the current period currency exchange rates and using the comparable prior period’s currency exchange rates. The company believes the disclosure of net sales changes in constant currency provides useful supplementary information to investors in light of fluctuations in currency rates.

FACTORS AFFECTING OUR RESULTS

COVID-19. The COVID-19 pandemic ~~including closures and other steps taken by governmental authorities in response to the virus,~~ has had a significant impact on our businesses. As part of our broad-based effort to respond to the COVID-19 pandemic, we implemented cost reduction measures, including temporary salary reductions, furloughs and reduced work hours across our workforce during the period from May 1, 2020 through July 31, 2020. Within our Dental segment, ~~the effect became less significant during the first quarter~~supply chain disruptions for personal protective equipment ("PPE") and an increased demand for these products initially resulted in backorders of ~~fiscal 2021,~~PPE and a potential scarcity in raw materials to make PPE, causing substantial price increases. We had to prepay suppliers in order to obtain PPE for resale to our customers, and as ~~dental offices began opening~~manufacturing caught up to increased demand for ~~elective procedures. In addition, we recorded increased sales of infection control products starting~~PPE, prices dropped, impacting our margins and requiring us to write down certain inventory, primarily in the first quarter of fiscal ~~2021 within the Dental segment.~~2022. The ~~disruptions we experienced in our production animal business as a result~~various impacts of the COVID-19 pandemic ~~became less significant after the first quarter of fiscal 2021.~~continue to affect our customers and supply chain.

Gains on ~~Investments.~~Vetsource Investment. During the three months ended July 31, 2021, we sold a portion of our investment in Vetsource, a commercial partner and leading home delivery provider for veterinarians, with a carrying value of $25.8 million for $56.8 million. We recorded a pre-tax gain of $31.0 million in gains on investments in our condensed consolidated statements of operations and other comprehensive income as a result of this sale. The cash received of $56.8 million is reported within investing activities in our condensed consolidated statements of cash flows. During the three months ended July 31, 2021, we also recorded a pre-tax non-cash gain of $31.0 million to reflect the increase in the carrying value of the remaining portion of our investment in Vetsource, which was based on the selling price of the portion of the investment we sold for $56.8 million. This gain was recorded in gains on investments in our condensed consolidated statements of operations and other comprehensive income. Concurrent with the sale completed in the first quarter of fiscal 2022, we obtained rights that will allow us, under certain circumstances, to require another shareholder of Vetsource to purchase our remaining shares. We recorded a pre-tax non-cash gain of $25.8 million in gains on investments in our condensed consolidated statements of operations and other comprehensive income as a result of this transaction. The aggregate gains on investments of $87.8 million are reported within operating activities in our condensed consolidated statements of cash flows. Concurrent with obtaining this put option, we also granted rights to the same Vetsource shareholder that would allow such shareholder, under certain circumstances, to require us to sell our remaining shares at fair value.

Fiscal 2022 Legal Reserve. On August 27, 2021, we signed a memorandum of understanding to settle the federal securities class action complaint described in Note 1110 to the Condensed Consolidated Financial Statements. Under the terms of the settlement, Patterson ~~will~~agreed to pay $63.0 million to resolve the case. Although we have agreed to settle this matter, we expressly deny the allegations of the complaint and all liability. Our insurers ~~have~~ consented to the settlement and ~~are expected to contribute~~contributed an aggregate of $35.0 million to fund the settlement and to reimburse us for certain costs and expenses of the litigation. As a result of the foregoing, we recorded a pre-tax reserve of $63.0 million in other accrued liabilities in the condensed consolidated balance sheets in our Corporate segment during the first quarter of fiscal 2022 related to the probable settlement of this litigation (the "Fiscal 2022 Legal Reserve"). During the first quarter of fiscal 2022, we also recorded a receivable of $27.0 million in prepaid expenses and other current assets in the condensed consolidated balance sheets in our Corporate segment related to probable insurance recoveries, which amount ~~we have negotiated to be~~was paid into the litigation settlement escrow as required by the memorandum of understanding. The net expense of $36.0 million was recorded in operating expenses in our condensed consolidated statements of

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operations and other comprehensive income. We ~~expect to record~~recorded a gain of $8.0 million during the second quarter of fiscal 2022 in our Corporate segment to account for ~~expected~~our receipt of carrier reimbursement of previously expended fees and ~~costs, which reimbursement we expect to receive~~costs. The parties filed a stipulation of settlement during the second quarter of fiscal 2022. ~~The~~On February 3, 2022, the District Court entered an order preliminarily approving the settlement ~~is subject~~and directing the claims administrator to ~~court approval of~~mail a ~~stipulation~~notice of settlement and claim form to all class members. On June 9, 2022, the District Court held a final settlement hearing to determine whether the settlement should be ~~drafted by~~approved. On June 10, 2022, the ~~parties.~~District Court entered an order granting final approval to the settlement.

Inventory Donation Charges. During the first quarter of fiscal 2022, we committed to donate certain ~~personal protective equipment~~PPE to charitable organizations to assist with COVID-19 recovery efforts. We recorded a charge of $49.2 million within cost of sales in our condensed consolidated statements of operations and other comprehensive income as a result ("Inventory Donation Charges"). in the first quarter of fiscal 2022. These charges were driven by our intention to not sell these products, but rather to donate them to charitable organizations. Of the $49.2 million expense recorded, $47.2 million and $2.0 million was recorded within our Dental and Animal Health segments, respectively.

Receivables Securitization Program. We are a party to certain receivables purchase agreements with MUFG Bank, Ltd. ("MUFG"), under which MUFG acts as an agent to facilitate the sale of certain Patterson receivables ~~(the~~

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(the “Receivables”) to certain unaffiliated financial institutions (the “Purchasers”). The proceeds from the sale of these Receivables comprise a combination of cash and a deferred purchase price (“DPP”) receivable. The DPP receivable is ultimately realized by Patterson following the collection of the underlying Receivables sold to the Purchasers. The collection of the DPP receivable is recognized as an increase to net cash provided by investing activities within the condensed consolidated statements of cash flows, with a corresponding reduction to net cash used in operating activities within the condensed consolidated statements of cash flows.

RESULTS OF OPERATIONS

QUARTER ENDED JULY ~~31, 2021~~30, 2022 COMPARED TO QUARTER ENDED JULY ~~25, 2020~~31, 2021

The following table summarizes our results as a percent of net sales:


		Three Months Ended					Three Months Ended
		July 31, 2021		July 25, 2020			July 30, 2022		July 31, 2021
Net sales	Net sales	100.0	%	100.0	%	Net sales	100.0	%	100.0	%
Cost of sales	Cost of sales	82.8		79.6		Cost of sales	79.5		82.8
Gross profit	Gross profit	17.2		20.4		Gross profit	20.5		17.2
Operating expenses	Operating expenses	19.6		17.4		Operating expenses	18.2		19.6
Operating (loss) income		(2.4)		3.0
Operating income (loss)						Operating income (loss)	2.3		(2.4)
Other income (expense)	Other income (expense)	5.2		(0.3)		Other income (expense)	(0.3)		5.2
Income before taxes	Income before taxes	2.8		2.7		Income before taxes	2.0		2.8
Income tax expense	Income tax expense	0.7		0.8		Income tax expense	0.4		0.7
Net income	Net income	2.1		1.9		Net income	1.6		2.1
Net loss attributable to noncontrolling interests	Net loss attributable to noncontrolling interests	—		—		Net loss attributable to noncontrolling interests	—		—
Net income attributable to Patterson Companies, Inc.	Net income attributable to Patterson Companies, Inc.	2.1	%	1.9	%	Net income attributable to Patterson Companies, Inc.	1.6	%	2.1	%

Net ~~Sales.~~Sales. Consolidated net sales for the three months ended July ~~31, 2021~~30, 2022 were ~~$1,614.9~~$1,523.3 million, ~~an increase~~a decrease of ~~29.6%~~5.7% from ~~$1,245.8~~$1,614.9 million for the three months ended July ~~25, 2020.~~31, 2021. Sales were ~~positively~~negatively impacted by an estimated ~~9.2%~~7.2% due to the extra week of results in the ~~current~~prior year quarter. Foreign exchange rate changes had ~~a favorable~~an unfavorable impact of ~~2.6%~~1.7% on current quarter sales. Sales of certain products previously recognized on a gross basis were recognized on a net basis during the three months ended July 31, 2021. This change in revenue recognition was driven by changes in contractual terms with certain suppliers. The impact of this change in revenue recognition for certain products was partially offset by the impact of the acquisition of substantially all of the assets of Miller Vet Holdings, LLC, a multiregional veterinary distributor ("Miller Vet"), on sales for the three months ended July 31, 2021, resulting in a net decrease in sales of approximately 3.3%.

Dental segment sales for the three months ended July ~~31, 2021~~30, 2022 were ~~$606.9~~$557.9 million, ~~an increase~~a decrease of ~~41.0%~~8.1% from ~~$430.3~~$606.9 million for the three months ended July ~~25, 2020.~~31, 2021. Sales were ~~positively~~negatively impacted by an estimated ~~9.7%~~6.8% due to the extra week of results in the ~~current~~prior year quarter. Foreign exchange rate changes had ~~a favorable~~an unfavorable impact of ~~1.6%~~0.4% on current quarter sales. Current quarter sales of consumables ~~increased 46.8%~~decreased 10.3%, sales of equipment and software ~~increased 38.9%~~decreased 6.7%, and sales of value-added services and other increased ~~20.8%~~0.3%. ~~Dental segment~~Consumable sales ~~growth in~~

~~Table~~decreased primarily as a result of ~~Contents~~

the ~~current quarter was driven by a recovery~~extra week of sales in the ~~Dental end markets, compared~~prior year quarter, as well as due to declining sales ~~during the three months ended July 25, 2020 which were negatively affected by the COVID-19 pandemic when dental offices were closed for elective procedures.~~of PPE.

Animal Health segment sales for the three months ended July ~~31, 2021~~30, 2022 were ~~$1,002.8~~$960.4 million, ~~an increase~~a decrease of ~~23.5%~~4.2% from ~~$812.2~~$1,002.8 million for the three months ended July ~~25, 2020.~~31, 2021. Sales were ~~positively~~negatively impacted by an estimated ~~8.9%~~7.5% due to the extra week of results in the ~~current~~prior year quarter. Foreign exchange rate changes had ~~a favorable~~an unfavorable impact of ~~3.1%~~2.4% on current quarter sales. Sales of certain products previously recognized on a gross basis were recognized on a net basis during the three months ended July 31, 2021. This change in revenue recognition was driven by changes in contractual terms with certain suppliers. The impact of this change in revenue recognition for certain products was partially offset byExcluding the impact of the ~~acquisition~~extra week of ~~Miller Vet on sales~~results for the three months ended July 31, 2021, ~~resulting~~both Production Animal and Companion Animal grew sales in ~~a net decrease in sales~~the first quarter of ~~approximately 5.0%. Sales were higher during the three months ended July 31, 2021, driven primarily by increased demand across all our animal health businesses and geographies.~~fiscal 2023.

Gross Profit. The consolidated gross profit margin rate for the three months ended July ~~31, 2021 decreased 320~~30, 2022 increased 330 basis points to ~~17.2%~~20.5%, driven primarily by the impact of the $49.2 million Inventory Donation ~~Charges.~~Charges recorded in the three months ended July 31, 2021. Excluding the impact of the Inventory Donation Charges, the gross profit margin rate increased 30 basis points as compared to the first quarter of fiscal 2022. The gross profit margin rate increased in both our Animal Health and Dental segments in the first quarter of fiscal 2023 as compared to the prior year quarter.

Operating Expenses. Consolidated operating expenses for the three months ended July ~~31, 2021~~30, 2022 were ~~$317.3~~$277.3 million, a ~~47.0% increase~~12.6% decrease from the prior year quarter of ~~$215.9~~$317.3 million. We incurred higher operating expenses during the three months ended July 31, 2021 primarily due to ~~higher personnel costs and~~ the impact of the Fiscal 2022 Legal Reserve. The higher personnel costs were primarily due to the salary reductions, reduced work hours, and furloughs we implemented as a response to the COVID-19 pandemic during the three months ended July 25, 2020. The

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consolidated operating expense ratio of ~~19.6% increased 230~~18.2% decreased 140 basis points from the prior year quarter, which was also driven primarily by ~~these same factors.~~this factor.

Operating Income (Loss) ~~Income.~~. For the three months ended July ~~31, 2021, our~~30, 2022, operating ~~loss~~income was ~~$39.5~~$34.8 million, or ~~2.4%~~2.3% of net sales, as compared to an operating ~~income~~loss of ~~$37.9~~$39.5 million, or ~~3.0%~~2.4% of net sales for the three months ended July ~~25, 2020.~~31, 2021. The ~~decrease~~increase in operating income was primarily due to the impact of the Fiscal 2022 Legal Reserve and the Inventory Donation Charges ~~as well as higher personnel costs incurred during~~recorded in the first quarter of 2022. These impacts were partially offset by the decrease in sales experienced in the first quarter of 2023, which were primarily driven by the extra week of results in the prior year quarter.

Dental segment operating income was $36.9 million for the three months ended July ~~31, 2021. These were partially mitigated by the growth in sales experienced during the three months ended July 31, 2021.~~

~~Dental segment~~30, 2022, compared to an operating loss ~~was~~of $1.1 million for the three months ended July 31, ~~2021, compared to~~2021. The increase in operating income ~~of $37.8 million for the three months ended July 25, 2020. The decrease~~ was primarily ~~driven by~~due to the ~~expense associated with~~impact of the Inventory Donation Charges ~~and higher personnel costs,~~recorded in the first quarter of 2022. This impact was partially ~~mitigated~~offset by ~~an increase~~the extra week of results in ~~dental segment net sales during~~ the ~~three months ended July 31, 2021.~~prior year quarter.

Animal Health segment operating income was $21.9 million and $23.8 million for the three months ended July 30, 2022, and July 31, 2021, ~~an increase~~respectively. The decline in the first quarter of ~~$6.4 million from~~fiscal 2023 was primarily driven by the extra week of results in the prior year quarter. ~~The increase was primarily driven by higher net sales during the three months ended July 31, 2021, partially offset by higher personnel costs incurred during the three months ended July 31, 2021.~~

Corporate segment operating loss was ~~$62.2~~$23.9 million and ~~$17.3~~$62.2 million for the three months ended July ~~31, 2021~~30, 2022 and July ~~25, 2020,~~31, 2021, respectively. The change was primarily driven by the impact of the Fiscal 2022 Legal ~~Reserve,~~Reserve.

Other Income (Expense). Net other expense for the three months ended July 30, 2022 was $3.8 million, as ~~well as higher personnel costs~~compared to net other income of $84.1 million for the three months ended July 31, 2021. The change was primarily driven by the Gains on Vetsource Investment of $87.8 million recorded during the three months ended July 31, 2021.

~~Other Income (Expense).~~ Net other income for the three months ended July 31, 2021 was $84.1 million, driven by the Gains on Investments of $87.8 million. Net other expense was $4.7 million for the three months ended July 25, 2020, driven by interest expense of $6.7 million.

Income Tax Expense. The effective income tax rate for the three months ended July ~~31, 2021~~30, 2022 was ~~24.1%~~21.9%, compared to ~~27.1%~~24.1% for the three months ended July ~~25, 2020.~~31, 2021. The decrease in the rate was primarily due to the impact of excess tax benefit deductions ~~associated with stock-based compensation awards.~~and a geographical shift in earnings.

Net Income Attributable to Patterson Companies, Inc. and Earnings Per Share. Net income attributable to Patterson Companies, Inc. for the three months ended July ~~31, 2021~~30, 2022 was ~~$34.0~~$24.6 million, compared to ~~$24.4~~$34.0 million for the three months ended July ~~25, 2020.~~31, 2021. Earnings per diluted share were ~~$0.35~~$0.25 in the current quarter compared to ~~$0.25~~$0.35 in the prior year quarter. Weighted average diluted shares outstanding in the current quarter were ~~98.3~~97.8 million, compared to ~~95.8~~98.3 million in the prior year quarter. The current quarter and prior year quarter cash dividend declared was $0.26 per common share.

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LIQUIDITY AND CAPITAL RESOURCES

Net cash used in operating activities was ~~$313.4~~$302.5 million and ~~$229.8~~$313.4 million for the three months ended July ~~31, 2021~~30, 2022 and July ~~25, 2020,~~31, 2021, respectively. Net cash used in operating activities for the three months ended July ~~31, 2021~~30, 2022 was primarily ~~due to~~driven by the impact of our Receivables Securitization Program and ~~a net~~an increase in ~~inventory, inclusive of the impact of the $49.2 million Inventory Donation Charges, partially offset by a decrease in accounts receivable.~~inventory.

Net cash provided by investing activities was ~~$345.0~~$238.4 million and ~~$133.4~~$345.0 million for the three months ended July ~~31, 2021~~30, 2022 and July ~~25, 2020,~~31, 2021, respectively. Collections of DPP receivables were ~~$315.2~~$252.9 million and ~~$139.5~~$315.2 million for the three months ended July 30, 2022 and July 31, 2021, respectively. Capital expenditures were $14.6 million and $7.7 million during the three months ended July 30, 2022 and July ~~25, 2020,~~31, 2021, respectively. During the three months ended July 31, 2021, we recorded cash receipts of $57.2 million from the sale of investments and used $19.8 million to acquire Miller Vet. ~~Capital expenditures were $7.7 million and $6.4 million during the three months ended July 31, 2021 and July 25, 2020, respectively.~~ We expect to use a total of approximately ~~$50.0~~$65.0 million for capital expenditures in fiscal ~~2022.~~2023.

Net cash provided by financing activities for the three months ended July 30, 2022 was $73.4 million, driven by $116.0 million attributed to draws on our revolving line of credit, partially offset by $25.4 million for dividend payments and $15.0 million for share repurchases. Net cash used in financing activities for the three months ended July 31, 2021 was $38.0 million, driven primarily by dividend payments of $25.1 million. For the three months ended July 25, 2020, net cash provided by financing activities was $135.3 million, driven primarily by $136.0 million attributed to draws on our revolving line of credit. During the three months ended July 25, 2020, we declared a cash dividend of $0.26 per common share, which was paid during the three months ended October 24, 2020.

In fiscal 2021, we entered into an amendment, restatement and consolidation of certain credit agreements with various lenders, including MUFG Bank, Ltd, as administrative agent. This amended and restated credit agreement (the “Credit Agreement”)~~, dated February 16, 2021,~~ consists of a $700.0 million revolving credit facility and a $300.0 million term loan facility, and will mature no later than February 2024. We used the facilities to refinance and consolidate certain credit

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agreements in existence prior to the Credit Agreement being executed, pay the fees and expenses incurred therewith, and finance our ongoing working capital and other general corporate purposes.

As of July ~~31, 2021,~~30, 2022, $300.0 million was outstanding under the Credit Agreement term loan at an interest rate of ~~1.22%~~3.37%, and ~~$42.0~~$145.0 million was outstanding under the Credit Agreement revolving credit facility at an interest rate of ~~1.21%~~3.13%. As of April ~~24, 2021,~~30, 2022, $300.0 million was outstanding under the Credit Agreement term loan at an interest rate of ~~1.36%~~1.89%, and ~~$53.0~~$29.0 million was outstanding under the Credit Agreement revolving credit facility at an interest rate of ~~1.34%~~1.54%.

We expect the collection of deferred purchase price receivables, existing cash balances and credit availability under existing debt facilities, less our funds used in operations, will be sufficient to meet our working capital needs and to finance our business over the remainder of fiscal ~~2022.~~2023.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

See Note 1 to the Condensed Consolidated Financial Statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in our exposure to market risk from that disclosed in Item 7A in our ~~2021~~2022 Annual Report on Form 10-K filed June ~~23, 2021.~~29, 2022.

ITEM 4. CONTROLS AND PROCEDURES

Under the supervision and with the participation of our management, including our President and Chief Executive Officer ("CEO") and our Chief Financial Officer ("CFO"), management evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of July ~~31, 2021.~~30, 2022. Based upon their evaluation of these disclosure controls and procedures, the CEO and CFO concluded that the disclosure controls and procedures were effective as of July ~~31, 2021.~~30, 2022.

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended July ~~31, 2021~~30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We accrue for these matters when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Unless otherwise noted, with respect to the specific legal proceedings and claims described herein, the amount or range of possible losses is not reasonably estimable. Adverse outcomes in some or all of these matters may result in significant monetary damages or injunctive relief against us that could adversely affect our ability to conduct our business. There also exists the possibility of a material adverse effect on our financial statements for the period in which the effect of an unfavorable outcome becomes probable and reasonably estimable.

See Note 1110 to the Condensed Consolidated Financial Statements appearing in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors disclosed in Part I, Item 1A, “Risk Factors” in our ~~2021~~2022 Annual Report on Form 10-K for the fiscal year ended April ~~24, 2021.~~30, 2022.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Purchases of Equity Securities by the Issuer

On March 16, 2021, the Board of Directors authorized a $500 million share repurchase program through March 16, 2024. ~~No shares were repurchased~~

The following table presents activity under the stock repurchase ~~plan~~program during the first quarter of fiscal ~~2022.~~2023.


	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Dollar Value of Shares That May Yet Be Purchased Under the Plan
May 1, 2022 to May 28, 2022	27,726	$	30.00	27,726	$	464,168,160
May 29, 2022 to June 25, 2022	487,967	29.04		487,967	450,000,000
June 26, 2022 to July 30, 2022	—	—		—	450,000,000
	515,693	$	29.09	515,693	$	450,000,000

Our Credit Agreement permits us to declare and pay dividends, and repurchase shares, provided that no default or unmatured default exists and that we are in compliance with applicable financial covenants.

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ITEM 6. EXHIBITS


Exhibit No.						Exhibit Description

10.1						Third Amended and Restated Receivables Purchase Agreement, dated as of December 3, 2010, among PDC Funding Company, LLC, as seller, Patterson Companies, Inc., as servicer, the conduits party thereto, the financial institutions party thereto, the purchaser agents party thereto, and MUFG Bank, Ltd. (f/k/a The Bank of Tokyo-Mitsubishi UFJ, Ltd.), as agent, conformed through Twenty-First Amendment, dated August 5, 2021 (filed herewith).

~~10.2~~						Second Amended and Restated Contract Purchase Agreement dated as of July 20, 2020, among PDC Funding Company II, LLC, as seller, Patterson Companies, Inc., as servicer, the purchasers party thereto, and Fifth Third Bank, National Association, as agent, conformed through ~~First~~Second Amendment, dated July ~~19, 2021 (filed herewith).~~18, 2022.

~~10.3~~						Receivables Purchase Agreement, dated as of July 24, 2018, by and among Patterson Dental Supply, Inc., as servicer, PDC Funding Company III, LLC, as seller, purchasers from time to time party thereto, and MUFG Bank, Ltd., as agent, conformed through Eighth Amendment, dated August 20, 2021 (filed herewith).

~~10.4~~						Receivables Purchase Agreement, dated as of January 15, 2020, by and among Patterson Veterinary Supply, Inc., as servicer, PDC Funding Company IV, LLC, as seller, purchasers from time to time party thereto, and MUFG Bank, Ltd., as agent, conformed through Sixth Amendment, dated August 20, 2021 (filed herewith).

31.1						Certification of the Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2						Certification of the Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1						Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2						Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101						(Filed Electronically) The following financial information from our Quarterly Report on Form 10-Q for the period ended July ~~31, 2021,~~30, 2022, formatted in Inline XBRL (Extensible Business Reporting Language): (i) the condensed consolidated balance sheets, (ii) the condensed consolidated statements of operations and other comprehensive income, (iii) the condensed consolidated statements of changes in stockholders’ equity, (iv) the condensed consolidated statements of cash flows and (v) the notes to the condensed consolidated financial statements.(*)

104						(Filed Electronically) The cover page from our Quarterly Report on Form 10-Q for the period ended July ~~31, 2021~~30, 2022 is formatted in Inline XBRL (Extensible Business Reporting Language).(*)

(*) The Inline XBRL related information in Exhibits 101 and 104 to this Quarterly Report on Form 10-Q shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.

All other items under Part II have been omitted because they are inapplicable or the answers are negative, or were previously reported in the ~~2021~~2022 Annual Report on Form 10-K filed June ~~23, 2021.~~29, 2022.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		PATTERSON COMPANIES, INC.
		(Registrant)

Dated: September ~~9, 2021~~1, 2022	By:	/s/ Donald J. Zurbay
		Donald J. Zurbay
		Chief Financial Officer ~~and Treasurer~~
		(Principal Financial Officer and Principal Accounting Officer)

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			Page
PART I - FINANCIAL INFORMATION

Item 1- Financial Statements			3

Condensed Consolidated Balance Sheets			3

Condensed Consolidated Statements of Operations and Other Comprehensive Income			4

Condensed Consolidated Statements of Changes in Stockholders' Equity			5

Condensed Consolidated Statements of Cash Flows			7

Notes to Condensed Consolidated Financial Statements			8

Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations			2019

Item 3 - Quantitative and Qualitative Disclosures about Market Risk			2524

Item 4 - Controls and Procedures			2524

PART II - OTHER INFORMATION

Item 1 - Legal Proceedings			2625

Item 1A - Risk Factors			2625

Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds			2625

Item 6 - Exhibits			2726

Signatures			2827