Patterson Companies - 10-Q quarterly report FY2023 Q3

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Table of Contents

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 January 28, 2023.


☐			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 February 21, 2023, there were 97,708,000 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)


	January 28, 2023		April 30, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	147,290	$	142,014
Receivables, net of allowance for doubtful accounts of $4,327 and $5,913	422,715		447,162
Inventory	939,098		785,604
Prepaid expenses and other current assets	335,611		304,242
Total current assets	1,844,714		1,679,022
Property and equipment, net	213,770		213,140
Operating lease right-of-use assets, net	74,783		70,722
Long-term receivables, net	130,733		138,812
Goodwill, net	156,317		140,630
Identifiable intangibles, net	241,463		252,614
Investments	159,365		139,182
Other non-current assets, net	120,846		107,508
Total assets	$	2,941,991	$	2,741,630
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	702,456	$	681,321
Accrued payroll expense	73,060		102,266
Other accrued liabilities	159,127		173,734
Operating lease liabilities	28,063		29,348
Current maturities of long-term debt	36,000		—
Borrowings on revolving credit	175,000		29,000
Total current liabilities	1,173,706		1,015,669
Long-term debt	451,910		488,554
Non-current operating lease liabilities	48,989		43,332
Other non-current liabilities	164,965		151,440
Total liabilities	1,839,570		1,698,995
Stockholders’ equity:
Common stock, $0.01 par value: 600,000 shares authorized; 97,708 and 96,762 shares issued and outstanding	977		968
Additional paid-in capital	226,525		200,520
Accumulated other comprehensive loss	(89,119)		(81,516)
Retained earnings	962,915		921,704

Total Patterson Companies, Inc. stockholders' equity	1,101,298		1,041,676
Noncontrolling interests	1,123		959
Total stockholders’ equity	1,102,421		1,042,635
Total liabilities and stockholders’ equity	$	2,941,991	$	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				Nine Months Ended
	January 28, 2023		January 29, 2022		January 28, 2023		January 29, 2022
Net sales	$	1,600,850	$	1,596,596	$	4,750,319	$	4,860,633
Cost of sales	1,257,888		1,259,985		3,767,135		3,919,785
Gross profit	342,962		336,611		983,184		940,848
Operating expenses	267,040		275,778		812,323		856,684
Operating income	75,922		60,833		170,861		84,164
Other income (expense):
Gains on investments	—		13,092		—		100,919
Other income, net	3,096		6,186		23,079		14,413
Interest expense	(9,731)		(4,879)		(22,838)		(15,595)
Income before taxes	69,287		75,232		171,102		183,901
Income tax expense	15,440		18,657		39,346		45,586


Net income	53,847		56,575		131,756		138,315
Net loss attributable to noncontrolling interests	(82)		(431)		(836)		(1,017)
Net income attributable to Patterson Companies, Inc.	$	53,929	$	57,006	$	132,592	$	139,332
Earnings per share attributable to Patterson Companies, Inc.:


Basic	$	0.55	$	0.58	$	1.37	$	1.43



Diluted	$	0.55	$	0.58	$	1.35	$	1.42
Weighted average shares:
Basic	97,327		97,471		96,957		97,213
Diluted	97,977		98,554		97,881		98,450
Dividends declared per common share	$	0.26	$	0.26	$	0.78	$	0.78
Comprehensive income:
Net income	$	53,847	$	56,575	$	131,756	$	138,315
Foreign currency translation (loss) gain	14,197		(6,506)		(8,385)		(5,742)
Cash flow hedges, net of tax	261		261		782		782
Comprehensive income	$	68,305	$	50,330	$	124,153	$	133,355

See accompanying notes

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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		Non-controlling Interests		Total
	Shares	Amount
Balance at April 24, 2021	96,813	$	968	$	169,099	$	(62,592)	$	855,741	$	1,455	$	964,671
Foreign currency translation	—	—		—		324		—		—		324
Cash flow hedges	—	—		—		261		—		—		261
Net income (loss)	—	—		—		—		33,996		(194)		33,802
Dividends declared	—	—		—		—		(25,540)		—		(25,540)
Common stock issued and related tax benefits	422	4		(756)		—		—		—		(752)

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
Foreign currency translation	—	—		—		440		—		—		440
Cash flow hedges	—	—		—		260		—		—		260
Net income (loss)	—	—		—		—		48,330		(392)		47,938
Dividends declared	—	—		—		—		(25,630)		—		(25,630)
Common stock issued and related tax benefits	257	3		2,708		—		—		—		2,711

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

Balance at October 30, 2021	97,492	975		184,548		(61,307)		886,897		869		1,011,982
Foreign currency translation	—	—		—		(6,506)		—		—		(6,506)
Cash flow hedges	—	—		—		261		—		—		261
Net income (loss)	—	—		—		—		57,006		(431)		56,575
Dividends declared	—	—		—		—		(25,592)		—		(25,592)
Common stock issued and related tax benefits	95	1		2,070		—		—		—		2,071

Stock-based compensation	—	—		4,887		—		—		—		4,887
Contribution from noncontrolling interest	—	—		—		—		—		500		500
Balance at January 29, 2022	97,587	976		191,505		(67,552)		918,311		938		1,044,178
Foreign currency translation	—	—		—		(14,224)		—		—		(14,224)
Cash flow hedges	—	—		—		260		—		—		260
Net income (loss)	—	—		—		—		63,878		(479)		63,399
Dividends declared	—	—		—		—		(25,495)		—		(25,495)
Common stock issued and related tax benefits	207	2		3,594		—		—		—		3,596
Repurchases of common stock	(1,032)	(10)		—		—		(34,990)		—		(35,000)
Stock-based compensation	—	—		5,421		—		—		—		5,421
Contribution from noncontrolling interest	—	—		—		—		—		500		500
Balance at April 30, 2022	96,762	$	968	$	200,520	$	(81,516)	$	921,704	$	959	$	1,042,635

See accompanying notes

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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		Non-controlling Interests		Total
	Shares	Amount
Balance at April 30, 2022	96,762	$	968	$	200,520	$	(81,516)	$	921,704	$	959	$	1,042,635
Foreign currency translation	—	—		—		(4,991)		—		—		(4,991)
Cash flow hedges	—	—		—		261		—		—		261
Net income (loss)	—	—		—		—		24,590		(330)		24,260
Dividends declared	—	—		—		—		(25,667)		—		(25,667)
Common stock issued and related tax benefits	653	6		(2,148)		—		—		—		(2,142)
Repurchases of common stock	(516)	(5)		—		—		(14,995)		—		(15,000)
Stock-based compensation	—	—		7,159		—		—		—		7,159
Contribution from noncontrolling interest	—	—		—		—		—		500		500

Balance at July 30, 2022	96,899	969		205,531		(86,246)		905,632		1,129		1,027,015
Foreign currency translation	—	—		—		(17,591)		—		—		(17,591)
Cash flow hedges	—	—		—		260		—		—		260
Net income (loss)	—	—		—		—		54,073		(424)		53,649
Dividends declared	—	—		—		—		(25,138)		—		(25,138)
Common stock issued and related tax benefits	150	1		2,178		—		—		—		2,179

Stock-based compensation	—	—		1,234		—		—		—		1,234
Contribution from noncontrolling interest	—	—		—		—		—		500		500

Balance at October 29, 2022	97,049	970		208,943		(103,577)		934,567		1,205		1,042,108
Foreign currency translation	—	—		—		14,197		—		—		14,197
Cash flow hedges	—	—		—		261		—		—		261
Net income (loss)	—	—		—		—		53,929		(82)		53,847
Dividends declared	—	—		—		—		(25,581)		—		(25,581)
Common stock issued and related tax benefits	659	7		14,626		—		—		—		14,633

Stock-based compensation	—	—		2,956		—		—		—		2,956


Balance at January 28, 2023	97,708	$	977	$	226,525	$	(89,119)	$	962,915	$	1,123	$	1,102,421

See accompanying notes

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PATTERSON COMPANIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Nine Months Ended
	January 28, 2023		January 29, 2022
Operating activities:
Net income	$	131,756	$	138,315


Adjustments to reconcile net income to net cash used in operating activities:
Depreciation	34,138		32,999
Amortization	28,160		28,406

Gains on investments	—		(100,919)

Non-cash employee compensation	11,349		18,384



Non-cash losses (gains) and other, net	7,227		5,815

Change in assets and liabilities:
Receivables	(729,039)		(850,628)
Inventory	(155,184)		(132,689)
Accounts payable	20,947		110,862
Accrued liabilities	(40,909)		(49,296)

Other changes from operating activities, net	(36,642)		(35,388)


Net cash used in operating activities	(728,197)		(834,139)
Investing activities:
Additions to property and equipment	(42,442)		(26,488)
Collection of deferred purchase price receivables	758,001		918,354
Payments related to acquisitions, net of cash acquired	(33,257)		(19,793)
Payments related to investments	(15,000)		—
Sale of investments	—		74,346



Net cash provided by investing activities	667,302		946,419
Financing activities:
Dividends paid	(75,954)		(75,746)
Repurchases of common stock	(15,000)		—



Payments on long-term debt	—		(100,750)
Draw on revolving credit	146,000		82,000
Other financing activities	12,866		4,030
Net cash provided by (used in) financing activities	67,912		(90,466)
Effect of exchange rate changes on cash	(1,741)		(14)
Net change in cash and cash equivalents	5,276		21,800
Cash and cash equivalents at beginning of period	142,014		143,244
Cash and cash equivalents at end of period	$	147,290	$	165,044

Supplemental disclosure of non-cash investing activity:
Retained interest in securitization transactions	$	746,321	$	822,787

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 January 28, 2023, and our results of operations and cash flows for the periods ended January 28, 2023 and January 29, 2022. Such adjustments are of a normal recurring nature. The results of operations for the three and nine months ended January 28, 2023 are not necessarily indicative of the results to be expected for any other interim period or for the year ending April 29, 2023. These financial statements should be read in conjunction with the financial statements included in our 2022 Annual Report on Form 10-K filed on June 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 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.

Fiscal Year End

We operate with a 52-53 week accounting convention with our fiscal year ending on the last Saturday in April. The third quarter of fiscal 2023 and 2022 represents the 13 weeks ended January 28, 2023 and January 29, 2022, respectively. The nine months ended January 28, 2023 and January 29, 2022 included 39 and 40 weeks, respectively. Fiscal 2023 will include 52 weeks and fiscal 2022 included 53 weeks.

Other Income, Net

Other income, net consisted of the following:


	Three Months Ended				Nine Months Ended
	January 28, 2023		January 29, 2022		January 28, 2023		January 29, 2022
(Loss) gain on interest rate swap agreements	$	(1,849)	$	3,688	$	9,275	$	5,805
Investment income and other	4,945		2,498		13,804		8,608
Other income, net	$	3,096	$	6,186	$	23,079	$	14,413

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 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 January 28, 2023 and January 29, 2022, respectively and $241 and $241 for the nine months ended January 28, 2023 and January 29, 2022, respectively.

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Earnings Per Share ("EPS")

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


	Three Months Ended		Nine Months Ended
	January 28, 2023	January 29, 2022	January 28, 2023	January 29, 2022
Denominator for basic EPS – weighted average shares	97,327	97,471	96,957	97,213
Effect of dilutive securities – stock options, restricted stock and stock purchase plans	650	1,083	924	1,237
Denominator for diluted EPS – weighted average shares	97,977	98,554	97,881	98,450

Potentially dilutive securities representing 900 shares and 954 shares for the three and nine months ended January 28, 2023 and 828 shares and 758 shares for the three and nine months ended January 29, 2022 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 January 28, 2023 and April 30, 2022 were $2,679 and $134, respectively. Our contract liabilities primarily relate to advance payments from customers, upfront payments for software and support provided over time, and options that provide a material right to customers, such as our customer loyalty programs. At January 28, 2023 and April 30, 2022, contract liabilities of $42,803 and $38,581 were reported in other accrued liabilities, respectively. During the nine months ended January 28, 2023, we recognized $32,968 of the amount previously deferred at April 30, 2022.

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Recently Issued Accounting Pronouncements

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” in 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 began to be phased out 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 and derivative instruments that currently utilize LIBOR as the reference rate.

Note 2. Acquisitions

During the third quarter of fiscal 2023, we acquired substantially all of the assets of Relief Services for Veterinary Practitioners and Animal Care Technologies (RSVP and ACT), Texas-based companies that provide innovative solutions to veterinary practices through data extraction and conversion, staffing and video-based training services. Also during the third quarter of fiscal 2023, we acquired substantially all of the assets of Dairy Tech, Inc., a Colorado-based company that provides pasteurizing equipment and single-use bags that allow dairy producers to produce, store and feed colostrum for newborn calves, as well as product offerings for beef cattle producers. These acquisitions are expected to expand our Companion Animal and Production Animal value-added platforms by adding solutions to their suite of offerings.

The total purchase price for these acquisitions is $37,573, which includes holdbacks of $4,255 that will be paid on the 24 month anniversary of the closing dates and estimated working capital adjustments of $61. As of January 28, 2023, we have recorded $17,300 of identifiable intangibles, $16,040 of goodwill, which is deductible for income tax purposes, and net tangible assets of $4,233 in our condensed consolidated balance sheets related to these acquisitions. Goodwill was recorded within the Animal Health segment and represents the expected benefit of integrating these value-added platforms with our existing operations. We have included their results of operations in our financial statements since the date of acquisition within the Animal Health segment. The accounting for these acquisitions is not complete because certain information and analysis that may impact our initial valuations are still being obtained or reviewed. The acquisitions did not materially impact our financial statements, and therefore pro forma results are not provided.

Note 3. 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 January 28, 2023, 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 January 28, 2023 and April 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 $401,649 and $396,443, respectively. Sales of trade receivables under this facility were $2,729,673 and $2,731,755, and cash collections from customers on receivables sold were $2,723,952 and $2,748,173 during the nine months ended January 28, 2023 and January 29, 2022, 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 losses of $3,254 and $663 during the three months ended January 28, 2023 and January 29, 2022, respectively, and $7,900 and $2,278 during the nine months ended January 28, 2023 and January 29, 2022, respectively, related to the Receivables.

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


	Nine Months Ended
		January 28, 2023		January 29, 2022
Beginning DPP receivable balance		$	195,764	$	183,999
Non-cash additions to DPP receivable		706,895		768,440
Collection of DPP receivable		(702,710)		(784,871)
Ending DPP receivable balance		$	199,949	$	167,568

Note 4. 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, Transfers and Servicing. We currently have two 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 January 28, 2023 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 January 28, 2023 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 or loss 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 nine months ended January 28, 2023 and January 29, 2022, we sold $205,140 and $225,300 of contracts under these arrangements, respectively. In net sales in the condensed consolidated statements of operations and other comprehensive income, we recorded a gain of $2,417 and a loss of $5,143 during the three months ended January 28, 2023 and January 29, 2022, respectively, related to these contracts sold. In net sales in the condensed consolidated statements of operations and other comprehensive income, we recorded a loss of $5,051 and $8,433 during the nine months ended January 28, 2023 and January 29, 2022, respectively, related to

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these contracts sold. Cash collections on financed receivables sold were $238,091 and $327,205 during the nine months ended January 28, 2023 and January 29, 2022, respectively.

Included in cash and cash equivalents in the condensed consolidated balance sheets are $30,846 and $39,106 as of January 28, 2023 and April 30, 2022, respectively, which represent cash collected from previously sold customer financing contracts that have not yet been settled. Included in current receivables in the condensed consolidated balance sheets are $36,454 and $58,190 as of January 28, 2023 and April 30, 2022, respectively, of finance contracts we have not yet sold. A total of $562,325 of finance contracts receivable sold under the arrangements was outstanding at January 28, 2023. 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:


	Nine Months Ended
		January 28, 2023		January 29, 2022
Beginning DPP receivable balance		$	125,332	$	227,967
Non-cash additions to DPP receivable		39,426		54,347
Collection of DPP receivable		(55,291)		(133,483)
Ending DPP receivable balance		$	109,467	$	148,831

The arrangements require us to maintain a minimum current ratio and maximum leverage ratio. We were in compliance with those covenants at January 28, 2023.

Note 5. Derivative Financial Instruments

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 January 28, 2023, PDC Funding had purchased an interest rate cap from a bank with a notional amount of $525,000 and a maturity date of August 2030. We sold an identical interest rate cap to the same bank. As of January 28, 2023, 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 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 30, 2022, the remaining notional amount for interest rate swap agreements was $574,144, with the latest maturity date in fiscal 2029. During the nine months ended January 28, 2023, we entered into forward interest rate swap agreements with a notional amount of $162,023. As of January 28, 2023, the remaining notional amount for interest rate swap agreements was $564,369, with the latest maturity date in fiscal 2030.

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Net cash receipts of $3,687 were received and net cash payments of $5,551 were made during the nine months ended January 28, 2023 and January 29, 2022, respectively, to settle a portion of our liabilities related to interest rate swap agreements. These payments and receipts are reflected as cash flows in the condensed consolidated statements of cash flows within net cash used in operating activities.

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


Derivative type	Classification	January 28, 2023		April 30, 2022
Assets:
Interest rate contracts	Prepaid expenses and other current assets	$	6,648	$	3,875
Interest rate contracts	Other non-current assets, net	25,666		19,871
Total asset derivatives		$	32,314	$	23,746
Liabilities:
Interest rate contracts	Other accrued liabilities	$	248	$	250
Interest rate contracts	Other non-current liabilities	12,994		10,013
Total liability derivatives		$	13,242	$	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				Nine Months Ended
Derivatives in cash flow hedging relationships	Statements of operations location	January 28, 2023		January 29, 2022		January 28, 2023		January 29, 2022
Interest rate contracts	Interest expense	$	(341)	$	(341)	$	(1,023)	$	(1,023)


		Amount of Gain (Loss) Recognized in Income on Derivatives
		Three Months Ended				Nine Months Ended
Derivatives not designated as hedging instruments	Statements of operations location	January 28, 2023		January 29, 2022		January 28, 2023		January 29, 2022
Interest rate contracts	Other income, net	$	(1,849)	$	3,688	$	9,275	$	5,805

There were no gains or losses recognized in other comprehensive income (loss) on cash flow hedging derivatives during the three and nine months ended January 28, 2023 or January 29, 2022.

We recorded no ineffectiveness during the three and nine month periods ended January 28, 2023 and January 29, 2022. As of January 28, 2023, 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. 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.

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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:


	January 28, 2023
	Total		Level 1		Level 2		Level 3
Assets:
Cash equivalents	$	1,637	$	1,637	$	—	$	—
DPP receivable - receivables securitization program	199,949		—		—		199,949
DPP receivable - customer financing	109,467		—		—		109,467
Derivative instruments	32,314		—		32,314		—
Total assets	$	343,367	$	1,637	$	32,314	$	309,416
Liabilities:
Derivative instruments	$	13,242	$	—	$	13,242	$	—


	April 30, 2022
	Total		Level 1		Level 2		Level 3
Assets:
Cash equivalents	$	3,186	$	3,186	$	—	$	—
DPP receivable - receivables securitization program	195,764		—		—		195,764
DPP receivable - customer financing	125,332		—		—		125,332
Derivative instruments	23,746		—		23,746		—
Total assets	$	348,028	$	3,186	$	23,746	$	321,096
Liabilities:
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 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

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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 $56,849 as of January 28, 2023 and April 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 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, which is subject to a floor, as of January 28, 2023 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 nine months ended January 28, 2023.

Our debt is not measured at fair value in the condensed consolidated balance sheets. The estimated fair value of our debt as of January 28, 2023 and April 30, 2022 was $483,606 and $489,777, respectively, as compared to a carrying value of $487,910 and $488,554 at January 28, 2023 and April 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).

The carrying amounts of receivables, net of allowances, accounts payable, and certain accrued and other current liabilities approximated fair value at January 28, 2023 and April 30, 2022.

Note 7. Income Taxes

The effective income tax rate for the three months ended January 28, 2023 was 22.3% compared to 24.8% for the three months ended January 29, 2022. The decrease in the rate for the three months ended January 28, 2023 was primarily due to provision to return adjustments in the current quarter and a geographical shift in earnings. The effective income tax rate for the nine months ended January 28, 2023 was 23.0% compared to 24.8% for the nine months ended January 29, 2022. The decrease in the rate for the nine months ended January 28, 2023 was primarily due to a prior period income tax reserve adjustment and a geographical shift in earnings.

Note 8. 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 and $1,000 during the nine months ended January 28, 2023 and the fiscal year ended April 30, 2022, respectively. 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. Since TPI was formed, there have been no changes in ownership interests. As of January 28, 2023, we had noncontrolling interests of $1,123 on our condensed consolidated balance sheets.

Net loss attributable to the noncontrolling interest was $82 and $431 for the three months ended January 28, 2023 and January 29, 2022, respectively, and $836 and $1,017 for the nine months ended January 28, 2023 and January 29, 2022, respectively.

Note 9. Segment and Geographic Data

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, 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.

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The following table provides a breakdown of sales by geographic region:


	Three Months Ended				Nine Months Ended
	January 28, 2023		January 29, 2022		January 28, 2023		January 29, 2022
Consolidated net sales
United States	$	1,344,048	$	1,329,051	$	3,980,068	$	4,006,576
United Kingdom	161,254		168,568		480,600		545,321
Canada	95,548		98,977		289,651		308,736
Total	$	1,600,850	$	1,596,596	$	4,750,319	$	4,860,633
Dental net sales
United States	$	562,740	$	591,397	$	1,638,095	$	1,694,044
Canada	59,056		59,236		170,541		185,671
Total	$	621,796	$	650,633	$	1,808,636	$	1,879,715
Animal Health net sales
United States	$	771,632	$	736,465	$	2,333,034	$	2,306,645
United Kingdom	161,254		168,568		480,600		545,321
Canada	36,492		39,741		119,110		123,065
Total	$	969,378	$	944,774	$	2,932,744	$	2,975,031
Corporate net sales
United States	$	9,676	$	1,189	$	8,939	$	5,887
Total	$	9,676	$	1,189	$	8,939	$	5,887

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The following table provides a breakdown of sales by categories of products and services:


	Three Months Ended				Nine Months Ended
	January 28, 2023		January 29, 2022		January 28, 2023		January 29, 2022
Consolidated net sales
Consumable	$	1,250,859	$	1,237,127	$	3,813,884	$	3,923,613
Equipment and software	252,671		276,446		670,502		683,711
Value-added services and other	97,320		83,023		265,933		253,309
Total	$	1,600,850	$	1,596,596	$	4,750,319	$	4,860,633
Dental net sales
Consumable	$	330,199	$	337,192	$	1,005,528	$	1,070,422
Equipment and software	216,642		241,384		577,158		591,787
Value-added services and other	74,955		72,057		225,950		217,506
Total	$	621,796	$	650,633	$	1,808,636	$	1,879,715
Animal Health net sales
Consumable	$	920,660	$	899,935	$	2,808,356	$	2,853,191
Equipment and software	36,029		35,062		93,344		91,924
Value-added services and other	12,689		9,777		31,044		29,916
Total	$	969,378	$	944,774	$	2,932,744	$	2,975,031
Corporate net sales
Value-added services and other	$	9,676	$	1,189	$	8,939	$	5,887
Total	$	9,676	$	1,189	$	8,939	$	5,887

The following table provides a breakdown of operating income (loss) by reportable segment:


	Three Months Ended				Nine Months Ended
	January 28, 2023		January 29, 2022		January 28, 2023		January 29, 2022





Operating income (loss)
Dental	$	60,302	$	64,125	$	158,147	$	118,609
Animal Health	30,197		23,420		80,372		73,360
Corporate	(14,577)		(26,712)		(67,658)		(107,805)
Total	$	75,922	$	60,833	$	170,861	$	84,164

The following table provides a breakdown of total assets by reportable segment:


	January 28, 2023		April 30, 2022
Total assets
Dental	$	912,422	$	851,746
Animal Health	1,635,193		1,459,450
Corporate	394,376		430,434
Total	$	2,941,991	$	2,741,630

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

The following table summarizes the changes in AOCL during the nine months ended January 28, 2023:

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	Cash Flow Hedges		Currency Translation Adjustment		Total
AOCL at April 30, 2022	$	(3,454)	$	(78,062)	$	(81,516)
Other comprehensive income before reclassifications	—		(8,385)		(8,385)
Amounts reclassified from AOCL	782		—		782
AOCL at January 28, 2023	$	(2,672)	$	(86,447)	$	(89,119)

The amounts reclassified from AOCL during the nine months ended January 28, 2023 include gains and losses on cash flow hedges, net of taxes of $241. The impact to the condensed consolidated statements of operations and other comprehensive income was an increase to interest expense of $1,023 for the nine months ended January 28, 2023.

Note 11. 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. Adverse outcomes 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.

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.

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 or

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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; 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 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, 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; failure to comply with existing or future U.S. or foreign laws and regulations including those governing the distribution of pharmaceuticals and controlled substances; 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.

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 nine months of fiscal 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.

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.

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respectively. The nine months ended January 28, 2023 and January 29, 2022 included 39 and 40 weeks, respectively. Fiscal 2023 will include 52 weeks and fiscal 2022 included 53 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, contributions from recent acquisitions and differences in the number of weeks in fiscal periods. Foreign currency 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 has had a significant impact on our businesses. Within our Dental segment, supply chain disruptions for personal protective equipment ("PPE") and an increased demand for these products initially resulted in backorders of PPE and a potential scarcity in raw materials to make PPE, causing substantial price increases primarily in fiscal 2021. We had to prepay suppliers in order to obtain PPE for resale to our customers, and as manufacturing caught up to increased demand for PPE, prices dropped, impacting our margins and requiring us to write down certain inventory, primarily in the first quarter of fiscal 2022. Although we have seen fewer supply chain disruptions since that time, the COVID-19 pandemic has and may continue to impact our supply chain. Furthermore, the COVID-19 pandemic has and may continue to affect demand for the goods and services we distribute as a result of the impact it has had and may continue to have on our customers.

Gains on 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.

Gain on Vets Plus Investment. During the three months ended January 29, 2022, we sold a portion of our investment in Vets Plus with a carrying value of $4.0 million for $17.1 million. We recorded a pre-tax gain of $13.1 million in gains on investments in our condensed consolidated statements of operations and other comprehensive income as a result of this sale in the third quarter of fiscal 2022. This $13.1 million pre-tax gain is reported within operating activities in our condensed consolidated statements of cash flows. The cash received of $17.1 million is reported within investing activities in our condensed consolidated statements of cash flows.

Fiscal 2022 Legal Reserve. In August 2021, we signed a memorandum of understanding to settle the federal securities class action complaint filed by Plymouth County Retirement System in March 2018. Under the terms of the settlement, Patterson agreed to pay $63.0 million to resolve the case. Although we agreed to settle this matter, we expressly deny the allegations of the complaint and all liability. Our insurers consented to the settlement and 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

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amount 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 operations and other comprehensive income. We recorded a gain of $8.0 million during the second quarter of fiscal 2022 in our Corporate segment to account for our receipt of carrier reimbursement of previously expended fees and costs. In June 2022, the 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 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 “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 JANUARY 28, 2023 COMPARED TO QUARTER ENDED JANUARY 29, 2022

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


	Three Months Ended
	January 28, 2023		January 29, 2022
Net sales	100.0	%	100.0	%
Cost of sales	78.6		78.9
Gross profit	21.4		21.1
Operating expenses	16.7		17.3
Operating income	4.7		3.8
Other income (expense)	(0.4)		0.9
Income before taxes	4.3		4.7
Income tax expense	0.9		1.2
Net income	3.4		3.5
Net loss attributable to noncontrolling interests	—		—
Net income attributable to Patterson Companies, Inc.	3.4	%	3.5	%

Net Sales. Consolidated net sales for the three months ended January 28, 2023 were $1,600.9 million, an increase of 0.3% from $1,596.6 million for the three months ended January 29, 2022. Foreign exchange rate changes had an unfavorable impact of 1.6% on current quarter sales.

Dental segment sales for the three months ended January 28, 2023 were $621.8 million, a decrease of 4.4% from $650.6 million for the three months ended January 29, 2022. Foreign exchange rate changes had an unfavorable impact of 0.6% on current quarter sales. Current quarter sales of consumables decreased 2.1%, sales of equipment and software decreased 10.3%, and sales of value-added services and other increased 4.0%. The decrease in the sales of equipment and software was primarily due to lower sales of CAD/CAM and digital imaging equipment.

Animal Health segment sales for the three months ended January 28, 2023 were $969.4 million, an increase of 2.6% from $944.8 million for the three months ended January 29, 2022. Foreign exchange rate changes had an unfavorable impact of 2.2% on current quarter sales.

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Gross Profit. The consolidated gross profit margin rate for the three months ended January 28, 2023 increased 30 basis points to 21.4%. The increase was driven by improved margins in our Animal Health segment, as well as favorability in our Corporate segment due to improvements in interest rates on our customer financing portfolio. This interest rate impact was partially offset by a loss on associated interest rate swap agreements, which is reflected in other income, net in our condensed consolidated statements of operations and other comprehensive income.

Operating Expenses. Consolidated operating expenses for the three months ended January 28, 2023 were $267.0 million, a 3.2% decrease from the prior year quarter of $275.8 million. The improvements were evenly spread across all segments due to the realization of operating expense efficiencies. The consolidated operating expense ratio of 16.7% decreased 60 basis points from the prior year quarter, which was driven primarily by higher net sales during the three months ended January 28, 2023.

Operating Income. For the three months ended January 28, 2023, operating income was $75.9 million, or 4.7% of net sales, as compared to $60.8 million, or 3.8% of net sales for the three months ended January 29, 2022. The growth in operating income was primarily due to a realized reduction in operating expenses, higher gross margins and a higher consolidated gross profit margin rate.

Dental segment operating income was $60.3 million and $64.1 million for the three months ended January 28, 2023 and January 29, 2022, respectively. The decrease in operating income was primarily due to decreased consumable and equipment sales.

Animal Health segment operating income was $30.2 million and $23.4 million for the three months ended January 28, 2023, and January 29, 2022, respectively. The increase in operating income was primarily due to increased sales and a higher gross profit margin rate.

Corporate segment operating loss was $14.6 million and $26.7 million for the three months ended January 28, 2023 and January 29, 2022, respectively. The change was primarily driven by higher customer financing-related net sales.

Other Income (Expense). Net other income reflected an expense of $6.6 million and income of $14.4 million for the three months ended January 28, 2023 and January 29, 2022, respectively. The change was primarily due to higher interest expense driven by interest rate increases during the three months ended January 28, 2023. The change was also driven by a larger gain on our interest rate swap agreements and the sale of a portion of an equity investment in Vets Plus during the three months ended January 29, 2022.

Income Tax Expense. The effective income tax rate for the three months ended January 28, 2023 was 22.3%, compared to 24.8% for the three months ended January 29, 2022. The decrease in the rate was primarily due to provision to return adjustments in the current quarter 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 January 28, 2023 was $53.9 million, compared to $57.0 million for the three months ended January 29, 2022. Earnings per diluted share were $0.55 in the current quarter compared to $0.58 in the prior year quarter. Weighted average diluted shares outstanding in the current quarter were 98.0 million, compared to 98.6 million in the prior year quarter. The current quarter and prior year quarter cash dividend declared was $0.26 per common share.

NINE MONTHS ENDED JANUARY 28, 2023 COMPARED TO NINE MONTHS ENDED JANUARY 29, 2022

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


	Nine Months Ended
	January 28, 2023		January 29, 2022
Net sales	100.0	%	100.0	%
Cost of sales	79.3		80.6
Gross profit	20.7		19.4
Operating expenses	17.1		17.7
Operating income	3.6		1.7
Other income (expense)	—		2.1
Income before taxes	3.6		3.8
Income tax expense	0.8		1.0
Net income	2.8		2.8
Net loss attributable to noncontrolling interests	—		—
Net income attributable to Patterson Companies, Inc.	2.8	%	2.8	%

Net Sales. Consolidated net sales for the nine months ended January 28, 2023 were $4,750.3 million, a 2.3% decrease from $4,860.6 million for the nine months ended January 29, 2022. Sales were negatively impacted by an estimated 2.4% due to the extra week of results in the prior year period. Foreign exchange rate changes had an unfavorable impact of 1.8% on current period sales.

Dental segment sales for the nine months ended January 28, 2023 were $1,808.6 million, a 3.8% decrease from $1,879.7 million for the nine months ended January 29, 2022. Sales were negatively impacted by an estimated 2.2% due to the extra week of results in the prior year period. Foreign exchange rate changes had an unfavorable impact of 0.5% on current period sales. Current period sales of consumables decreased 6.1%, sales of equipment and software decreased 2.5% to $577.2 million, and sales of value-added services and other increased 3.9%. Consumable sales decreased primarily as a result of the extra week of sales in the prior year period, as well as due to lower sales of PPE.

Animal Health segment sales for the nine months ended January 28, 2023 were $2,932.7 million, a 1.4% decrease from $2,975.0 million for the nine months ended January 29, 2022. Sales were negatively impacted by an estimated 2.5% due to the extra week of results in the prior year period. Foreign exchange rate changes had an unfavorable impact of 2.6% on current period sales. Excluding the impact of the extra week of results in the prior year period, both Production Animal and Companion Animal sales grew in the nine months ended January 28, 2023.

Gross Profit. The consolidated gross profit margin rate for the nine months ended January 28, 2023 increased 130 basis points from the prior year period to 20.7%, driven primarily by the impact of the $49.2 million Inventory Donation Charges on the prior year period and higher net sales in our Corporate segment for the nine months ended January 28, 2023. Excluding the impact of the Inventory Donation Charges, the gross profit margin rate increased approximately 30 basis points as compared to the nine months ended January 29, 2022. The gross profit margin rate increased in both our Animal Health and Dental segments in the nine months ended January 28, 2023 as compared to the nine months ended January 29, 2022.

Operating Expenses. Consolidated operating expenses for the nine months ended January 28, 2023 were $812.3 million, a 5.2% decrease from the prior year period of $856.7 million. We incurred higher operating expenses during the prior year period primarily due to the impact of the Fiscal 2022 Legal Reserve, as well as realizing operational expense efficiencies in our Dental and Animal Health segments in the nine months ended January 28, 2023. The consolidated operating expense ratio of 17.1% decreased 60 basis points from the prior year period, which was also driven by these same factors.

Operating Income. For the nine months ended January 28, 2023, operating income was $170.9 million, or 3.6% of net sales, as compared to $84.2 million, or 1.7% of net sales for the nine months ended January 29, 2022. The increase in operating income was primarily due to higher gross margins compared to the prior year which was impacted by the Inventory Donation Charges recorded in the prior year, and a higher consolidated gross profit margin rate, as well as the impact of the Fiscal 2022 Legal Reserve recorded in the prior year.

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Dental segment operating income was $158.1 million for the nine months ended January 28, 2023, an increase of $39.5 million from the prior year period. The increase was primarily driven by the expense associated with the Inventory Donation Charges recorded during the nine months ended January 29, 2022, partially offset by lower net sales in the nine months ended January 28, 2023.

Animal Health segment operating income was $80.4 million for the nine months ended January 28, 2023, an increase of $7.0 million from the prior year period. The increase was primarily driven by a higher gross profit margin rate, partially offset by lower net sales and higher operating expenses during the nine months ended January 28, 2023.

Corporate segment operating loss was $67.7 million and $107.8 million for the nine months ended January 28, 2023 and January 29, 2022, respectively. The change was primarily driven by the impact of the Fiscal 2022 Legal Reserve, and higher customer financing net sales recorded during the nine months ended January 28, 2023.

Other Income (Expense). Net other income was $0.2 million and $99.7 million for the nine months ended January 28, 2023 and January 29, 2022, respectively. We recorded higher net other income during the nine months ended January 29, 2022 due to the impact of the gain on the Vetsource investment of $87.8 million, the gain on the Vets Plus investment, and higher interest expense driven by interest rates during the nine months ended January 28, 2023.

Income Tax Expense. The effective income tax rate for the nine months ended January 28, 2023 was 23.0%, compared to 24.8% for the nine months ended January 29, 2022. The decrease in the rate was primarily due to a prior period income tax reserve adjustment 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 nine months ended January 28, 2023 was $132.6 million, compared to $139.3 million for the nine months ended January 29, 2022. Earnings per diluted share were $1.35 in the current period compared to $1.42 in the prior year period. Weighted average diluted shares outstanding in the current period were 97.9 million, compared to 98.5 million in the prior year period. The current period and prior year period cash dividend declared was $0.78 per common share.

LIQUIDITY AND CAPITAL RESOURCES

Net cash used in operating activities was $728.2 million and $834.1 million for the nine months ended January 28, 2023 and January 29, 2022, respectively. Net cash used in operating activities for the nine months ended January 28, 2023 was primarily driven by the impact of our Receivables Securitization Program and an increase in working capital.

Net cash provided by investing activities was $667.3 million and $946.4 million for the nine months ended January 28, 2023 and January 29, 2022, respectively. Collections of DPP receivables were $758.0 million and $918.4 million for the nine months ended January 28, 2023 and January 29, 2022, respectively. Capital expenditures were $42.4 million and $26.5 million during the nine months ended January 28, 2023 and January 29, 2022, respectively. We expect to use a total of approximately $65.0 million for capital expenditures in fiscal 2023. During the nine months ended January 28, 2023, we used $33.3 million for acquisitions and used $15.0 million to purchase a Dental investment, and during the nine months ended January 29, 2022, we recorded cash receipts of $74.3 million from the sale of investments and used $19.8 million to acquire Miller Vet.

Net cash provided by financing activities for the nine months ended January 28, 2023 was $67.9 million, driven by $146.0 million attributed to draws on our revolving line of credit, partially offset by $76.0 million for dividend payments and $15.0 million for share repurchases. Net cash used in financing activities for the nine months ended January 29, 2022 was $90.5 million, driven primarily by dividend payments of $75.7 million.

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”) consisted of a $700.0 million revolving credit facility and a $300.0 million term loan facility, and was set to mature no later than February 2024.

In the second quarter of fiscal 2023, we amended and restated the Credit Agreement (the “Amended Credit Agreement”). The Amended Credit Agreement consists of a $700.0 million revolving credit facility and a $300.0 million term loan facility, and will mature no later than October 2027. We used the Amended Credit Agreement facilities to refinance and consolidate the Credit Agreement, and pay the fees and expenses incurred therewith. We

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expect to use the Amended Credit Agreement to finance our ongoing working capital needs and for other general corporate purposes.

As of January 28, 2023, $299.3 million was outstanding under the Amended Credit Agreement term loan at an interest rate of 5.76%, and $175.0 million was outstanding under the Amended Credit Agreement revolving credit facility at an interest rate of 5.66%. As of April 30, 2022, $300.0 million was outstanding under the Credit Agreement term loan at an interest rate of 1.89%, and $29.0 million was outstanding under the Credit Agreement revolving credit facility at an interest rate of 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 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 2022 Annual Report on Form 10-K filed June 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 January 28, 2023. 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 January 28, 2023.

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 January 28, 2023 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

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors disclosed in Part I, Item 1A, “Risk Factors” in our 2022 Annual Report on Form 10-K for the fiscal year ended April 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. As of January 28, 2023 there was $450 million remaining under the stock repurchase program.

No shares were repurchased under the stock repurchase program during the third quarter of fiscal 2023.

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						Inducement, Severance and Change-in-Control Agreement by and between Patterson Companies, Inc. and Kevin M. Barry, dated December 13, 2022 (incorporated by reference to our Current Report on Form 8-K, filed December 15, 2022 (File No. 000-20572)).









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 January 28, 2023, 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 January 28, 2023 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 2022 Annual Report on Form 10-K filed June 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: March 2, 2023	By:	/s/ Kevin M. Barry
		Kevin M. Barry
		Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)


			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			18

Item 3 - Quantitative and Qualitative Disclosures about Market Risk			25

Item 4 - Controls and Procedures			25

PART II - OTHER INFORMATION

Item 1 - Legal Proceedings			26

Item 1A - Risk Factors			26

Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds			26

Item 6 - Exhibits			27

Signatures			28

Patterson Companies - 10-Q quarterly report FY2023 Q3

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