Patterson Companies Annual Report 2021

FY2021 Annual Report · Patterson Companies

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2021 Annual Report

INDISPENSABLE
PARTNERS

LETTER TO SHAREHOLDERS

During fiscal 2021 Patterson successfully navigated
the historic challenges posed by the COVID-19
pandemic to actively support our customers, our
industries and our communities. We also expanded
our value proposition for our customers, drove
improved financial performance for our shareholders,
and strengthened Patterson for the future.

Our financial performance in fiscal 2021 reflected the
fundamental strength of the dental and animal health
markets, and our enterprise-wide focus to strengthen
our core business around sales execution, operational
excellence, and working capital improvement. Patterson
demonstrated the depth of our comprehensive, value-
added offering to our customers, delivered strong top-
and bottom-line growth, and enhanced returns for our
shareholders.

• Patterson’s consistent execution, combined with our

investments to drive sales productivity and enhance our
value proposition, delivered total company internal sales1
growth of 8 percent.

• Both business segments achieved strong sales

growth while overcoming numerous pandemic-related
challenges. Internal sales of our Dental segment
increased 10 percent over the prior year and our Animal
Health segment grew 8 percent year over year.

• Our sharp focus on expense discipline and margin

improvement initiatives resulted in full-year consolidated
adjusted operating margin of 4.2 percent.

• Patterson delivered fiscal 2021 GAAP earnings of $1.61
per diluted share and fiscal 2021 adjusted earnings2
of $1.91 per diluted share, exceeding our fiscal 2020
adjusted EPS by 23.2 percent.

• Our balanced capital allocation strategy prioritizes

returning cash to shareholders and Patterson returned
$75.2 million to shareholders through quarterly
dividends during fiscal 2021.

As COVID-19 significantly impacted our end markets during
the year, we effectively responded to the operational and
financial challenges posed by the pandemic. We adhered
to our guiding principles of protecting employee health
and safety, delivering for our customers when they needed
us most, and doing our part to help reduce the spread of
the virus in our communities. We also made the necessary
decisions to properly manage our costs and strengthen our
balance sheet to help ensure we would emerge an even
stronger Patterson.

Dental
Fiscal 2021 was another strong year for Patterson’s Dental
business, particularly given the unprecedented disruption
within the market. As the dental market transitioned from
lockdown to recovery, Patterson’s deep value proposition
was recognized and rewarded by our customers across all
practice models.

• Our consumables growth of 15 percent in fiscal 2021

reflects the continued investments Patterson has made
to strengthen our field sales and support teams and
expand our product portfolio.

• We also drove momentum in equipment sales as we
grew 8 percent in fiscal 2021 over the prior year. Our
ability to support our customers throughout the entire
life cycle of their equipment and technology investments
continues to be an important differentiator for Patterson.

Looking forward, we are confident the dental market
presents attractive growth opportunities for Patterson.
We expect the increased demand for infection control

1 The term “internal sales” represents net sales adjusted to exclude foreign currency impact and changes in product selling relationships.
2 See page 8 of this document for Reconciliation of GAAP to non-GAAP Measures.

products to remain above pre-pandemic levels as dentists
embrace this new standard of care. We also believe
dentists will continue investing in the latest technologies
and software to build and modernize their practices.
Finally, we are encouraged by the heightened awareness
that oral health has a direct link to a patient’s overall
health. All these factors give us confidence in the long-
term outlook for the dental industry.

Animal Health
Patterson’s Animal Health business delivered strong
internal sales growth in fiscal 2021, led by growth in our
Companion Animal business of 17 percent over the prior
year. Our Companion and Production Animal businesses
each responded to meet the dynamic needs of our
customers, driving improved segment performance in
fiscal 2021.

• In our Companion Animal business, the rise in pet
ownership during the pandemic drove increased
veterinary clinic traffic and pet spending. Our deep
relationships with veterinarians positioned us well to
support their growth, improve their customer experience
and offer home delivery capabilities.

• While pandemic-related end market challenges were
more evident in our Production Animal business, our
team executed well to drive operational improvements
and deliver value to our customers. We responded to
supply chain disruption and provided customers with
highly specialized service and delivery models to support
herd health and preserve the quality of the food supply.

Looking ahead to fiscal 2022, we expect the market
fundamentals of increased pet ownership and pet
spending will continue as positive drivers in the companion
animal market. We also believe the production animal
market will recover as restaurants continue to reopen and
schools return to in-person learning. Our differentiated
value proposition and strong market position give us
confidence that our Animal Health segment will contribute
sales and profit growth in fiscal 2022.

A bright future
I am incredibly proud of our entire Patterson team and
their commitment to our vision of being “an indispensable
partner for our customers.” I am pleased with the
momentum we have built in our business and confident
in Patterson’s improved competitive position. As we look
ahead, we will continue investing in the core areas of our
business to drive top- and bottom-line growth and expand
our capabilities to support our customers. In addition,
our strengthened balance sheet provides us with the
flexibility to consider strategic investments that will help
accelerate our performance and create additional value
for our shareholders.

Thank you for your support and interest in Patterson
Companies.

Mark Walchirk
President and Chief Executive Officer

July 30, 2021

Revenue
Dollars in billions

GAAP EPS
Dollars

Adjusted EPS 2
Dollars

FY2021 Sales
FY2021 Highlights
Percent

$5.575

$5.490

$5.912

$1.61

$1.55

$1.40

$.89

FY2019

FY2020

FY2021

FY2019

FY2021

FY2019

FY2020

FY2021

($6.25)

FY2020

$1.91

• Internal sales increased
8% vs. FY2020

• Adjusted EPS increased

$5.9
23% over prior year
Billion

• Adjusted EPS compound
annual growth rate of 17%
from FY2019 to FY2021

Dental 40%
Animal Health 60%

WE ARE PATTERSON
Indispensable partner serving the dental and animal health

$5.9B
FY2021
TOTAL SALES

$2.3B
FY2021
DENTAL SALES

$3.6B
FY2021
ANIMAL HEALTH
SALES

144
YEARS IN
BUSINESS

PATTERSON DENTAL

Our Dental segment had a very strong year. Our
commitment to offering the right products, services and
technology, combined with our extensive local support
and the Patterson Technology Center, is valued by
dental professionals across all practice models. Even
when most dental professionals were forced to shut
their doors due to the pandemic, our team was with
them every step of the way, providing information and
guidance to help them come back stronger than ever.

FY2021 total
Dental sales

Consumable 56%

Equipment and software 31%

Value-added services and other 13%

$2.3
Billion

FY2021 key accomplishments

Timely response to customer needs
Including the increased demand for infection control
products, our consumable sales grew by 15 percent as
we supported our customers in reopening their
practices with the right products to keep their staff and
patients safe.

Providing the right technology
Our commitment to supporting all dental professionals
through offering the latest technology was highlighted
by the successful launch of Fuse® – our cloud-based
dental practice management software.

Continued support to allow for quick reopening
Our “Reopen. Restore.” Playbook was created as a
resource to help dentists successfully reopen their
practices, and reinforced our commitment to being a
trusted partner.

markets in North America and the United Kingdom

150,000+
CUSTOMERS

7,800
EMPLOYEES

439,000+
PRODUCTS

10M+
TOTAL PACKAGES
SHIPPED IN FY2021

PATTERSON ANIMAL HEALTH

Our Animal Health segment delivered strong sales
growth this past year, aided by the increase in pet
ownership which drove increased veterinary traffic and
pet spending. Our Production Animal team responded
to supply chain disruption to support herd health
and preserve the quality of the food supply. Our
combination of diverse products, value-added offerings
and best-in-class support allowed our companion and
production customers to maintain and even grow their
business despite the uncertain circumstances.

FY2021 total
Animal Health sales

Consumable 96%

Equipment and software 3%

Value-added services and other 1%

$3.6
Billion

FY2021 key accomplishments

Strong revenue growth
Internal sales in our Animal Health segment grew
8 percent over the prior year as a result of our intense
focus on sales execution and strategic relationships
with key supplier partners.

Continued success with strategic accounts
Our broad product portfolio and strengthened support
from our team during the pandemic led to significant
wins with new strategic accounts while growing existing
account relationships.

Equipment and software sales momentum
Internal sales in our equipment and software category
grew 27 percent year over year, driven by our expanded
portfolio of products and services and increased demand
for new practice builds.

LIVING
OUR VALUES

Our dedication to living our Purpose, Vision and Values became more important
than ever this past year, as we adjusted to the unforeseen challenges that impacted our
industries and our communities. Our values are how we attract, motivate, develop and
retain our team, and they are the core of our commitment to our customers, partners and
each other. From contributing PPE and other supplies to the communities that we serve,
to donating paid time off to team members in need, our employees have truly demonstrated
what it means to embrace our values.

PURPOSE

We Are Patterson.

We Strengthen the People
Who Keep Us and Our
Animals Healthy.

VISION

We will be the most
indispensable partner for animal
and oral health professionals,
guiding them with bold solutions
and a personal touch.

VALUES

We are PASSIONATE.

We are FOCUSED.

We are PEOPLE-FIRST.

We are ALWAYS ADVANCING.

We are
PASSIONATE

Elaine Tili, a distribution
supervisor at our PLSI facility
in Kent, Washington, is
passionate about serving
customers. She says,
“Customers put their trust in
us, and I am proud to make
sure they have the tools and
resources to care for patients
and their communities.”

We are
FOCUSED

The Production Animal
Operations team in Columbus,
Nebraska, stayed focused on
fulfilling customers’ orders to
feedlots, veterinarians and
dairies in the High Plains
Region, despite the combined
impact of spring flooding and
the global pandemic.

We are
PEOPLE-FIRST

Patterson employees
stepped up to help
Minneapolis and St. Paul
after the civil unrest that
took place in the summer
of 2020 by volunteering
at Holy Trinity Lutheran
Church’s food and supply
distribution, and at a pop-
up food shelf.

We are
ALWAYS ADVANCING

The commercial development
team at the Patterson
Technology Center (PTC)
converted its in-person
Innovate events to a virtual
format in 2020. During these
events, teams collaborated
on ideas and projects, and
explored innovative solutions
to improve our business.

CORPORATE
RESPONSIBILITY

At Patterson, we are dedicated to serving our communities
by our commitment to corporate responsibility. These
initiatives include implementing more environmentally
responsible practices, promoting diversity and inclusion, and
providing resources and developmental opportunities for
team members. Our efforts also include driving continuous
improvement across our organization and ensuring strong
adherence to proper compliance and governance.

To learn more, see our Corporate
Responsibility Report at https://www.
pattersoncompanies.com/who-we-are/
default.aspx#section=community

MORE THAN
$1,106,244
PATTERSON
FOUNDATION
GRANTS GIVEN

198
NONPROFITS
SUPPORTED

MORE THAN
$14M
DONATED IN
OVER 20 YEARS

$50,206
DONATED
TO DOLLARS
FOR DOERS

1,113.5
VOLUNTEER
HOURS USED

OVER
$168K
PRODUCT
VALUE DONATED

43
SCHOLARSHIP
RECIPIENTS

$621,734
SCHOLARSHIP
DOLLARS

FINANCIAL SUMMARY

(Dollars in thousands, except per share amounts)

Net sales

Gross profit

Operating income (loss)

Net income (loss) attributable to Patterson Companies, Inc.

Fiscal year ended

April 24, 2021 April 25, 2020 April 27, 2019

$5,912,066

$5,490,011 $5,574,523

1,203,130

1,197,410

1,190,775

210,607

155,981

(572,119)

(588,446)

137,716

83,628

Diluted earnings (loss) per share attributable to Patterson Companies, Inc.

$ 1.61

(6.25) $ 0.89

Cash and cash equivalents

Working capital

Total assets

Total long-term debt

Stockholders’ equity

$ 143,244

$ 77,944

$ 95,646

526,263

467,867

728,651

2,751,511

2,715,350

3,269,269

487,545

964,671

587,766

725,341

836,444

1,480,507

RECONCILIATION OF GAAP TO NON-GAAP MEASURES

The following reconciliation of GAAP to non-GAAP measures table is provided to adjust reported GAAP measures, namely
operating income (loss), income (loss) before taxes, income tax expense (benefit), net income (loss), net income (loss) attributable
to Patterson Companies, Inc. and diluted earnings (loss) per share attributable to Patterson Companies, Inc., for the impact of deal
amortization, integration and business restructuring expenses, legal reserve costs, accelerated debt-related costs, discrete tax
matters, investment (gain) loss and goodwill impairment, along with the related tax effects of these items.

Management believes that these non-GAAP measures may provide a helpful representation of the company's full year performance
and enable comparison of financial results between periods where certain items may vary independent of business performance.
These non-GAAP financial measures are presented solely for informational and comparative purposes and should not be regarded
as a replacement for corresponding, similarly captioned, GAAP measures.

The term “internal sales” represents net sales adjusted to exclude the impact of foreign currency and changes in product
selling relationships.

Fiscal year ended

(Dollars in thousands, except per share amounts)

April 24, 2021 April 25, 2020 April 27, 2019

Net income (loss) attributable to Patterson Companies, Inc. – GAAP

$155,981

$(588,446)

$ 83,628

Deal amortization

Integration and business restructuring expenses

Legal reserve costs

Accelerated debt-related costs

Discrete tax matters

Investment gain

Goodwill impairment

28,210

28,208

29,201

817

–

11,591

74,141

7,457

–

20,740

–

(2,686)

(25,983)

640,627

–

Net income attributable to Patterson Companies, Inc. – non-GAAP

$185,008

$ 147,595

$130,883

Diluted earnings (loss) per share attributable to Patterson Companies, Inc. – GAAP

$ 1.61

$ (6.25)

$ 0.89

Deal amortization

Integration and business restructuring expenses

Legal reserve costs

Accelerated debt-related costs

Discrete tax matters

Investment gain

Goodwill impairment

0.29

0.01

–

0.30

0.12

0.78

0.08

–

(0.27)

6.74

0.31

–

0.22

–

(0.03)

–

Diluted earnings per share attributable to Patterson Companies, Inc. – non-GAAP* $ 1.91

$ 1.55

$ 1.40

Operating income (loss) as a % of sales – GAAP

Operating income as a % of sales – non-GAAP

3.6%

(10.4%)

4.2%

4.3%

2.5%

3.7%

*May not sum due to rounding and difference in weighted average shares used to calculate diluted earnings (loss) per share.

Forward-looking statements made in this report are subject to the cautionary statements in the Company’s Form 10-K, filed with the Securities and
Exchange Commission on June 23, 2021, under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and
Results of Operations.”

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K

☒

☐

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

For the fiscal year ended April 24, 2021

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

For the transition period from to
Commission File No. 0-20572
PATTERSON COMPANIES, INC.
(Exact name of registrant as specified in its charter)

Minnesota

(State or other jurisdiction of
incorporation or organization)

41-0886515

(I.R.S. Employer
Identification No.)

1031 Mendota Heights Road
St. Paul, Minnesota 55120
(Address of principal executive offices including Zip Code)

Registrant’s telephone number, including area code: (651) 686-1600

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

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x

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 x 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 x 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.

Large accelerated filer

Smaller reporting company

x Accelerated filer
☐ Emerging growth company

☐

Non-accelerated filer

☐

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 has filed a report on and attestation to its management's assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting
firm that prepared or issued its audit report ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x
The aggregate market value of voting common equity held by non-affiliates, computed by reference to the price at which the common equity was
last sold as of the last business day of the registrant's most recently completed second fiscal quarter (October 24, 2020) was approximately
$2,590,000,000 (For purposes of this calculation all of the registrant’s executive officers and directors are deemed affiliates.)

As of June 16, 2021, there were 96,880,000 shares of Common Stock of the registrant issued and outstanding.

Portions of the registrant’s definitive proxy statement to be filed pursuant to Regulation 14A within 120 days after the registrant’s fiscal year-end
of April 24, 2021 are incorporated by reference into Part III.

Documents Incorporated By Reference

FORM 10-K INDEX

PART I

Item 1.

BUSINESS

Item 1A.

RISK FACTORS

Item 1B.

UNRESOLVED STAFF COMMENTS

Item 2.

Item 3.

Item 4.

PART II

Item 5.

Item 6.

Item 7.

PROPERTIES

LEGAL PROCEEDINGS

MINE SAFETY DISCLOSURES

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES

SELECTED CONSOLIDATED FINANCIAL DATA

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Item 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Item 8.

Item 9.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

Item 9A.

CONTROLS AND PROCEDURES

Item 9B.

OTHER INFORMATION

PART III

Item 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Item 11.

EXECUTIVE COMPENSATION

Item 12.

Item 13.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE

Item 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

PART IV

Item 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

Item 16.

FORM 10-K SUMMARY

SCHEDULE II

SIGNATURES

Page
3

Item 1. BUSINESS

Forward-Looking Statements

PART I

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. Certain information of a non-historical nature
contained in Items 1, 2, 3 and 7 of this Form 10-K includes “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, such statements, including, but not limited
to, our statements regarding business strategy, growth strategy, competitive strengths, productivity and profitability
enhancement, competition, new product and service introductions and liquidity and capital resources, 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, as well as on
assumptions made by and information currently available to management, and involve various risks and
uncertainties, some of which are beyond our control.

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. Reference is made to “Risk Factors” in Item 1A and “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” in Item 7 of this Form 10-K, for a discussion of certain factors that
could cause actual operating results to differ materially from those expressed in any forward-looking statements. In
light of these risks and uncertainties, there can be no assurance that the forward-looking information will in fact
prove to be accurate. 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 and information which may be contained in this Form
10-K and 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 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-K 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.

General

Patterson Companies, Inc. is a value-added specialty distributor serving the U.S. and Canadian dental supply
markets and the U.S., Canadian and U.K. animal health supply markets. Patterson operates through its two
strategic business units, Patterson Dental and Patterson Animal Health, offering similar products and services to
different customer bases. Each business has a strong competitive position, serves a highly fragmented market that
offers consolidation opportunities and offers relatively low-cost consumable supplies, which makes our value-added
business proposition highly attractive to our customers. We believe that we have a strong brand identity as a value-
added, full-service distributor with broad product and service offerings, having begun distributing dental supplies in
1877.

Impacts of 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. In March 2020, based upon the recommendations of the
American Dental Association, the American Veterinary Medical Association and such organizations’ state-level
counterparts, various dental and veterinary offices announced that they were performing only emergency or limited
procedures, and rescheduled wellness exams and other elective procedures. In addition, many states and countries
imposed restrictions on business operations to protect public health. Finally, the pandemic disrupted meat packing
operations, which impacted our Animal Health segment.

In response, management adapted our business practices with respect to employee travel, employee work
locations, and cancellation of physical participation in meetings, events and conferences. Management also took
proactive steps with respect to our liquidity position and near-term cost structure, including through incremental
borrowings on our revolving credit facility to increase cash, reduction of non-critical capital expenditures, executive,
board, and other senior-level employee compensation reductions, employee furloughs, discretionary spending
deferrals and the deferral of payroll taxes under the CARES Act.

In our markets of the U.S., Canada, and the UK, restrictive measures have now been lifted or are expected to be
lifted soon, sometimes subject to social distancing and capacity restrictions, due to the rapid pace of vaccination
and improving local case rates. However, other areas around the world continue to suffer. Concerns remain that our
markets could see a resurgence of cases triggering another shutdown, for example due to the emergence of a
variant not effected by existing vaccines. In addition, COVID-19 continues to have a material effect on the
macroeconomic environment, and there is continued uncertainty around its duration and ultimate impact.

Refer to Part I, Item 1A, “Risk Factors,” and Part II, Item 7, “Management's Discussion and Analysis of Financial
Condition and Results of Operations,” within this Annual Report for further information on the impacts to our
business and results of operations, our dividends, liquidity and debt arrangements, and associated risks and
uncertainties.

Business Overview

The following table sets forth consolidated net sales (in millions) by segment.

Dental

Animal Health

Corporate

Consolidated net sales

Fiscal Year Ended

April 24, 2021

April 25, 2020

April 27, 2019

2,327 $

2,102 $

3,560

3,336

5,912 $

5,490 $

2,192

3,355

5,575

Our strategically located fulfillment centers enable us to better serve our customers and increase our operating
efficiency. This infrastructure, together with broad product and service offerings at competitive prices, and a strong
commitment to customer service, enables us to be a single source of supply for our customers’ needs. Our
infrastructure also allows us to provide convenient ordering and rapid, accurate and complete order fulfillment.

Electronic commerce solutions have become an integral part of dental and animal health supply and distribution
relationships. Our distribution business is characterized by rapid technological developments and intense
competition. The continuing advancement of online commerce requires us to cost-effectively adapt to changing
technologies, to enhance existing services and to develop and introduce a variety of new services to address the
changing demands of consumers and our customers on a timely basis, particularly in response to competitive
offerings. We believe that our tradition of reliable service, our name recognition and large customer base built on
solid customer relationships, position us well to participate in this significant aspect of the distribution business. We
continue to explore methods to improve and expand our Internet presence and capabilities, including our online
commerce offerings and our use of various social media outlets.

Patterson became publicly traded in 1992 and is a corporation organized under the laws of the state of Minnesota.
We are headquartered in St. Paul, Minnesota. Our principal executive offices are located at 1031 Mendota Heights
Road, St. Paul, Minnesota 55120, and our telephone number is (651) 686-1600. Unless the context specifically
requires otherwise, the terms the “Company,” “Patterson,” “we,” “us” and “our” mean Patterson Companies, Inc., a
Minnesota corporation, and its consolidated subsidiaries.

The Specialty Distribution Markets We Serve

We provide manufacturers with cost effective logistics and high-caliber sales professionals to access a
geographically diverse customer base, which is critical to the supply chain for the markets we serve. We provide our
customers with an array of value-added services, a dedicated and highly skilled sales team, and a broad selection
of products through a single channel, thereby helping them efficiently manage their ordering process. Due in part to
the inability of our customers to store and manage large quantities of supplies at their locations, the distribution of
supplies and small equipment has been characterized by frequent, small-quantity orders, and a need for rapid,
reliable and substantially-complete order fulfillment. Supplies and small equipment are generally purchased from
more than one distributor, with one generally serving as the primary supplier.

We believe that consolidation within the industry will continue as distributors, particularly those with limited financial,
operating and marketing resources, seek to combine with larger companies that can provide growth opportunities.
This consolidation also may continue to result in distributors seeking to acquire companies that can enhance their
current product and service offerings or provide opportunities to serve a broader customer base.

Dental Supply Market

The dental supply market we serve consists of geographically dispersed and highly fragmented dental practices.
Customers range in size from sole practitioners to large group practices, often called Dental Service Organizations
("DSO's"). According to the American Dental Association and the Canadian Dental Association, there are
approximately 201,000 dentists practicing in the U.S. and 21,000 dentists practicing in Canada. We believe the
average dental practitioner purchases supplies from more than one supplier.

We believe the North American dental supply market continues to experience growth due to an increasing
population, an aging population, advances in dentistry, demand for general, preventive and specialty services,
increasing demand for new technologies that allow dentists to increase productivity, demand for infection control
products, and insurance coverage by dental plans.

We support dental professionals through the many stock keeping units (“SKUs”) that we offer, as well as through
important value-added services, including equipment and technology installation and service, practice management
software, electronic claims processing, financial services, and continuing education, all designed to help make a
dental practice more efficient.

Animal Health Supply Market

The animal health supply market is a mix of production animal supply, which primarily serves food producing
animals, consisting of beef and dairy cattle, swine and poultry and other species such as sheep and goats, and
companion animal supply, which serves pets, primarily dogs, cats and horses. Similar to the dental supply market,
the animal health supply market is highly fragmented and diverse. Our production animal customers include large
animal veterinarians, beef producers (cow/calf, stocker and feedlots), dairy producers, poultry producers, swine
producers and retail customers. Our companion animal customers are primarily small animal and equine veterinary
clinics, including independently owned, corporates and groups. According to the American Veterinary Medical
Association, there are more than 70,000 veterinarians in private practice in the U.S. and Canada. Furthermore,
there are approximately 20,000 veterinarians in the U.K. practicing in veterinary outlets; however, we believe there
has been a shift in the U.K. market toward consolidation of veterinary practices. National Veterinary Services
Limited, is the market leader in the U.K. veterinary market, with the highest percentage of buying groups and
corporations as customers compared to its competitors, and the highest share position in that country overall.

The global animal health supply market continues to experience growth, and we believe that trend will continue for
the foreseeable future. We support our animal health customers through the distribution of biologicals,
pharmaceuticals, parasiticides, supplies, including our own private label brands, and equipment. We also supply a
full portfolio of technologies, software, services and solutions to all segments and channels of our broad customer
base. We actively engage in the development, sale and distribution of inventory, accounting and health
management systems to enhance customer operating efficiencies and assist our customers in managing risk.
Within the companion animal supply market, we anticipate increasing demand for veterinary services due to the
following factors: the increasing number of households with companion animals, increased pet adoption rates and
increased expenditures on animal health and preventative care, an aging pet population, advancements in animal
health products and diagnostic testing, and extensive marketing programs sponsored by companion animal nutrition
and pharmaceutical companies.

We anticipate the macroeconomic trend of global population growth and corresponding demand for protein will be
favorable to the production animal segment in the future. Likewise, the rise in disposable income, especially in
developing countries will be a key driver of future growth. However; product sales in the production animal supply
market are more likely to be impacted by volatility in the market such as commodity prices, changes in weather
patterns, and trends in the general economy. Many factors can influence how long cattle will graze and
consequently the number of days an animal is on feed during a finishing phase. Supply and demand dynamics and
economic trends can shift the number of animals treated, the timing of when animals are treated, to what extent
they are treated and with which products they are treated. Historically, sales in this market have been largely driven
by spending on animal health products to improve productivity, weight gain and disease prevention, as well as a
growing focus on health and wellness of the animals, safety, and efficiency in livestock production.

Competition

The distribution industry is highly competitive. It consists principally of national, regional and local full-service
distributors. Substantially all of the products we sell are available to customers from a number of suppliers. In
addition, our competitors could obtain exclusive rights from manufacturers to market particular products. Some
manufacturers also sell directly to end-users, thereby eliminating or reducing our role and that of other distributors.

We compete with other distributors, as well as several manufacturers, of dental and animal health products, on the
basis of price, breadth of product line, customer service and value-added products and services. To differentiate
ourselves from our competition we deploy a strategy of premium customer service with multiple value-added
components, a highly qualified and motivated sales force, highly-trained and experienced service technicians, an
extensive breadth and mix of products and services, technology solutions allowing customers to easily access our
inventory, accurate and timely delivery of product, strategic location of sales offices and fulfillment centers, and
competitive pricing.

In the U.S. and Canadian dental supply market, we compete against Henry Schein, Inc., Benco Dental Supply
Company, Burkhart Dental Supply and hundreds of distributors that operate on a regional or local level, or online.
Also, as noted above, some manufacturers sell directly to end users. With regard to our dental practice
management software, we compete against numerous companies, including Carestream Health, Inc. and Henry
Schein, Inc.

In the U.S. and Canadian animal health supply market, our primary competitors are AmerisourceBergen/MWI
Animal Health and Covetrus, Inc. We also compete against a number of regional and local animal health
distributors, some manufacturers that sell direct to end users and several alternative channel market providers that
sell through digital platforms to production animal operators, animal health product retailers and veterinarians.
Additionally, major U.S. online e-commerce retailers such as Amazon and Chewy.com are becoming licensed as
veterinary mail order pharmacies to offer pharmacy products directly to consumers in all 50 U.S. states. In the
animal health practice management market, our primary competitors are IDEXX Laboratories, Inc. and Covetrus,
Inc. We face significant competition in the animal health supply market in the U.K., where we compete on the basis
of price and customer service with several large competitors, including Covetrus, Inc. and AmerisourceBergen. We
also compete directly with pharmaceutical companies who sell certain products or services directly to the customer.

Successful distributors are increasingly providing value-added services in addition to the products they have
traditionally provided. We believe that to remain competitive we must continue to add value to the distribution
channel, while removing unnecessary costs associated with product movement. Significant price reductions by our
competitors could result in competitive harm. Any of these competitive pressures may materially adversely affect our
operating results.

Competitive Strengths

We have more than 140 years of experience in distributing products resulting in strong awareness of the Patterson
brand. Although further information regarding these competitive strengths is set forth below in the discussion of our
two strategic business units, our competitive strengths include:

•

Broad product and service offerings at competitive prices. We offer approximately 200,000 SKUs to our
customers, including many proprietary branded products. We believe that our proprietary branded products
and our competitive pricing strategy have generated a loyal customer base that is confident in our brands.
Of the SKUs offered, approximately 100,000 are offered to our dental customers and approximately
100,000 are offered to our animal health customers. Our product offerings include consumables, equipment,
software and various technologies. Our value-added services include practice management software, office
design, equipment installation and maintenance, and financing.

•

Focus on customer relationships and exceptional customer service. Our sales and marketing efforts are
designed to establish and solidify customer relationships through personal visits by field sales
representatives, interaction via phone with sales representatives, web-based activities including e-
commerce and frequent direct marketing, emphasizing our broad product lines, competitive prices and ease
of order placement. We focus on providing our customers with exceptional order fulfillment and a
streamlined ordering process.

Cost-effective purchasing and efficient distribution. We believe that cost-effective purchasing is a key
element to maintaining and enhancing our position as a competitive-pricing provider of dental and animal
health products. We strive to maintain optimal inventory levels to satisfy customer demand for prompt and
complete order fulfillment through our distribution of products from strategically located fulfillment centers.

Business Strategy

Our objective is to continue to expand as a leading value-added distributor of dental and animal health products and
services. To accomplish this, we will apply our competitive strengths in executing the following strategies:

•

Emphasizing our differentiated, value-added, full-service capabilities. We are positioned to meet virtually all
of the needs of dental practitioners, veterinarians, production animal operators and animal health product
retailers by providing a broad range of consumable supplies, technology, equipment and software and
value-added services. We believe our knowledgeable sales representatives can create customer intimacy
and loyalty by providing an informational, consultative approach to our customers, linking them to the
industries we serve. Our value-added strategy is further supported by our equipment specialists who offer
consultation on design, equipment requirements and financing, our service technicians who perform
equipment installation, maintenance and repair services, our business development professionals who
provide business tools and educational programs to our customers, and our technology advisors who
provide guidance on integrating technology solutions.

for

platforms

predominant

Using technology to enhance customer service. As part of our commitment to providing superior customer
service, we offer our customers easy order placement. Although we offer computerized order entry systems
that we believe help establish relationships with new customers and increase loyalty among existing
customers,
include www.pattersondental.com,
ordering
www.pattersonvet.com and www.animalhealthinternational.com. The use of these methods of ordering
enables our sales representatives to spend more time with existing and prospective customers. Our Internet
environment includes order entry, customer support for digital and our proprietary products, customer-
loyalty program reports and services, and access to articles and manufacturers’ product information. We
also provide real-time customer and sales information to our sales force, managers and vendors via the
Internet. In addition, the Patterson Technology Center (“PTC”) differentiates Patterson from our competition
by providing deep and thorough expertise in practice management software and other advanced equipment
and technology clinical solutions. In addition to trouble-shooting through the PTC’s support center,
customers can access various service capabilities offered by the PTC, including electronic claims and
statement processing and system back-up capabilities.

today

Continuing to improve operating efficiencies. We continue to implement programs designed to improve our
operating efficiencies and allow for continued sales growth. This strategy includes our continuing investment
in management information systems and consolidation and leveraging of fulfillment centers and sales
branches between our operating segments. In addition, we have established shared sales branch offices in
several locations.

• Growing through internal expansion and acquisitions. We intend to continue to grow by hiring established
sales representatives, hiring and training skilled sales professionals, opening additional locations as
needed, and acquiring other companies in order to enter new, or more deeply penetrate existing, markets,
gain access to additional product lines, and expand our customer base. We believe both of our operating
segments are well positioned to take advantage of expected continued consolidation in our markets.

Dental Segment - Products, Services and Sources of Supply

Patterson Dental, one of the two largest distributors of dental products in North America, has operations in the U.S.
and Canada. As a full-service, value-added supplier to over approximately 107,000 dental practices, dental
laboratories, educational institutions, and community health centers, Patterson Dental provides consumable
products (including infection control, restorative materials, and instruments); basic and advanced technology and

dental equipment; and innovative practice optimization solutions, including practice management software, e-
commerce, revenue cycle management, patient engagement solutions, and clinical and patient education. Patterson
Dental offers customers approximately 100,000 SKUs of which more than 3,500 are private-label products sold
under the Patterson brand. Patterson Dental also offers customers a range of related services including software
and design services, maintenance and repair, and equipment financing. Net sales and operating income were $2.3
billion and $201 million in fiscal 2021, respectively.

The following table sets forth the percentage of total sales by the principal categories of products and services
offered to our dental segment customers:

Consumable
Equipment and software
Value-added services and other (1)

Fiscal Year Ended

April 24, 2021

April 25, 2020

April 27, 2019

56 %
31
13
100 %

54 %
32
14
100 %

55 %
32
13
100 %

(1) Consists of other value-added services, including software and design service, and maintenance and repair.

Patterson Dental obtains products from hundreds of vendors, most of which are non-exclusive. While there is
generally more than one source of supply for most of the categories of products we sell, the concentration of
business with key suppliers is considerable, as consolidation has increased among manufacturers. In fiscal 2021,
2020 and 2019, Patterson Dental's top ten supply vendors accounted for approximately 57%, 63% and 48% of the
total cost of sales, respectively. The top vendor accounted for 25%, 22% and 19% of the total cost of sales in fiscal
2021, 2020 and 2019, respectively.

Animal Health Segment - Products, Services and Sources of Supply

Patterson Animal Health is a leading distributor of animal health products in the U.S., Canada and the U.K. We sell
more than 100,000 SKUs sourced from over 2,000 manufacturers to over 50,000 customers in the highly
fragmented animal health supply market. Products we distribute include pharmaceuticals, vaccines, parasiticides,
diagnostics, prescription and non-prescription diets, nutritionals, consumable supplies, equipment and software. We
offer a private label portfolio of products to veterinarians, producers, and retailers through our Aspen, First
Companion and Patterson Veterinary brands. We also provide a range of value-added services to our customers.
Within our companion animal supply market, our principal customers are companion-pet and equine veterinarians,
veterinary clinics, public and private institutions, and shelters. In our production animal supply market, our principal
customers are large animal veterinarians, production animal operators and animal health product retailers.
Consumer demand for alternative means of sourcing product through digital platforms is an evolving dynamic in our
industry. We provide digital home delivery solutions to allow us to evolve with the market. Net sales and operating
income were $3.6 billion and $88 million in fiscal 2021, respectively.

The following table sets forth the percentage of total sales by the principal categories of products and services
offered to our animal health segment customers:

Consumable

Equipment and software

Value-added services and other

Fiscal Year Ended

April 24, 2021

April 25, 2020

April 27, 2019

96 %

100 %

97 %

100 %

97 %

100 %

Patterson Animal Health obtains products from over 2,000 vendors globally. While Patterson Animal Health makes
purchases from many vendors and there is generally more than one source of supply for most of the categories of
products, the concentration of business with key vendors is considerable, as consolidation has increased among
manufacturers. In fiscal 2021, 2020 and 2019, Patterson Animal Health’s top 10 manufacturers comprised
approximately 70%, 70% and 65% of the total cost of sales, respectively, and the single largest supplier comprised
approximately 20% of the total cost of sales in each year.

Sales, Marketing and Distribution

During fiscal 2021, we sold products or services to over 157,000 customers who made one or more purchases
during the year. Our customers include dentists, laboratories, institutions, other healthcare professionals,
veterinarians, other animal health professionals, production animal operators and animal health product retailers.
No single customer accounted for more than 10% of sales during fiscal 2021, and we are not dependent on any
single customer or geographic group of customers.

We have offices throughout the U.S. and Canada so that we can provide a presence in the market and decision-
making near the customer. Patterson Animal Health also has a central office in the U.K. Our offices, or sales
branches, are staffed with a complete complement of our capabilities, including sales, customer service and
technical service personnel, as well as a local manager who has decision-making authority with regard to customer-
related transactions and issues.

A primary component of our value-added approach is our professional sales and support organization. Due to the
highly-fragmented nature of the markets we serve, we believe that our unique combination of field-based and call-
center sales and support teams is critical to reaching potential customers and providing a differentiated customer
experience. Our sales representatives play an indispensable and critical role in managing a practice’s supply chain
and in introducing new products and technologies.

In the U.S. and Canada, customer service representatives in call centers work in tandem with our sales
representatives, providing a dual coverage approach for individual customers. In addition to processing orders,
customer service representatives are responsible for assisting customers with ordering, informing customers of
monthly promotions, and responding to general inquiries. In the U.K., our customer service team is primarily
responsible for handling customer inquiries and resolving issues.

To assist our customers with their purchasing decisions, we provide a multi-touchpoint shopping experience. From
print to digital, this seamless experience is inclusive of products and services information. Patterson offers online
and in-print showcases of our expansive merchandise and equipment offerings, including digital imaging and
computer-aided design and computer-aided manufacturing ("CAD/CAM") technologies, hand-held and similar
instruments, sundries, office design, e-services, repair and support assistance, as well as financial services. We
also promote select products and services through our monthly magazine, Insight, in the U.S. and Canada, and our
quarterly magazine, The Cube, in the U.K. Additional direct marketing tools that we utilize include customer loyalty
programs, social media, and participation in trade shows.

We believe that responsive delivery of quality supplies and equipment is key to customer satisfaction. We ship
consumable supplies from our strategically located fulfillment centers in the U.S. and Canada. In the U.K., orders
are accepted in a centralized fulfillment center and shipped nationwide to one of our depots located throughout the
country at which pre-packed orders are sorted by route for delivery to customers. Orders for consumable supplies
can be placed through our sales representatives, customer service representatives or electronically 24 hours a day,
seven days a week. Rapid and accurate order fulfillment is another principal component of our value-added
approach.

In order to assure the availability of our broad product lines for prompt delivery to customers, we must maintain
sufficient inventories at our fulfillment centers. Purchasing of consumables and standard equipment is centralized,
and our purchasing department uses a real-time perpetual inventory system to manage inventory levels. Our
inventory consists mostly of consumable supply items and pharmaceutical products.

Geographic Information

For information on revenues and long-lived assets of our segments by geographic area, see Note 13 to the
Consolidated Financial Statements.

Seasonality and Other Factors Affecting Our Business and Quarterly Results

Our business in general is not seasonal; however, there are some products that typically sell more often during the
winter or summer season. In any given month, unusual weather patterns (e.g., unusually hot or cold weather) could
impact the sales volumes of these products, either positively or negatively. In addition, we experience fluctuations in
quarterly earnings. As a result, we may fail to meet or exceed the expectations of securities analysts and investors,
which could cause our stock price to decline. Quarterly results may be materially adversely affected by a variety of
factors, including:

•

•
•

•

timing and amount of sales and marketing expenditures;

timing of pricing changes offered by our suppliers;

timing of the introduction of new products and services by our suppliers;

changes in or availability of supplier contracts or rebate programs;

supplier rebates based upon attaining certain growth goals;

changes in the way suppliers introduce or deliver products to market;

costs of developing new applications and services;

our ability to correctly identify customer needs and preferences and predict future needs and preferences;

uncertainties regarding potential significant breaches of data security or disruptions of our information
technology systems;

regulatory actions, or government regulation generally;

loss of sales representatives;

costs related to acquisitions and/or integrations of technologies or businesses;

costs associated with our self-insured insurance programs;

general market and economic conditions, as discussed in Item 1A: Risk Factors, including pandemic and
civil unrest, as well as those specific to the supply and distribution industry and related industries;
our success in establishing or maintaining business relationships;
difficulties of manufacturers in developing and manufacturing products;

product demand and availability, or product recalls by manufacturers;

exposure to product liability and other claims in the event that the use of the products we sell results in
injury;

increases in shipping costs or service issues with our third-party shippers;

fluctuations in the value of foreign currencies;

goodwill impairment;

changes in interest rates;

restructuring costs;

the adoption or repeal of legislation;

changes in accounting principles; and

litigation or regulatory judgments, fines, forfeitures, penalties, equitable remedies, expenses or settlements.

Governmental Regulation

We strive to be substantially compliant with the applicable laws, regulations and guidance described below, and
believe we have effective compliance programs and other controls in place to ensure substantial compliance.
However, compliance is not guaranteed either now or in the future, as certain laws, regulations and guidance may
be subject to varying and evolving interpretations that could affect our ability to comply, as well as future changes,
additions, and enforcement approaches, including in light of political changes. For example, President Biden’s
administration has authorized and encouraged a freeze on certain federal regulations that have been published but
are not yet effective, as well as a review of all federal regulations issued during President Trump’s administration.
Changes with respect to the applicable laws, regulations and guidance described below may require us to update or
revise our operations, services, marketing practices, and compliance programs and controls, and may impose
additional and unforeseen costs on us, pose new or previously immaterial risks to us, or may otherwise have a
material adverse effect on our business.

Operating, Security and Licensure Standards

Our dental and animal health supply businesses involve the distribution, importation, exportation, marketing and
sale of, and third party payment for, pharmaceuticals and medical devices, and in this regard we are subject to
various local, state, federal and foreign governmental laws and regulations applicable to the distribution of
pharmaceuticals and medical devices. Among the U.S. federal laws applicable to us are the Controlled Substances
Act, the Federal Food, Drug, and Cosmetic Act, as amended (the “FDC Act”), and Section 361 of the Public Health
Service Act, as well as laws regulating the billing of and reimbursement from government programs, such as
Medicare and Medicaid, and from commercial payers. We are also subject to comparable foreign regulations.

The FDC Act, the Controlled Substances Act, their implementing regulations, and similar foreign laws generally
regulate the introduction, manufacture, advertising, marketing and promotion, sampling, pricing and reimbursement,
labeling, packaging, storage, handling, returning or recalling, reporting, and distribution of, and record keeping for,
pharmaceuticals and medical devices shipped in interstate commerce, and states may similarly regulate such
activities within the state. Furthermore, Section 361 of the Public Health Service Act, which provides authority to
prevent the introduction, transmission, or spread of communicable diseases, serves as the legal basis for the U.S.
Food and Drug Administration’s (“FDA”) regulation of human cells, tissues and cellular and tissue-based products,
also known as “HCT/P products.”

The federal Drug Quality and Security Act of 2013 brought about significant changes with respect to pharmaceutical
supply chain requirements. Title II of this measure, known as the Drug Supply Chain Security Act (“DSCSA”), is
being phased in over a period of 10 years, and is intended to build a national electronic, interoperable system to
identify and trace certain prescription drugs as they are distributed in the U.S. The law’s track and trace
requirements applicable to manufacturers, wholesalers, repackagers and dispensers (e.g., pharmacies) of
prescription drugs took effect in January 2015. The DSCSA product tracing requirements replace the former FDA
drug pedigree requirements and pre-empt certain state requirements that are inconsistent with, more stringent than,
or in addition to, the DSCSA requirements.

The DSCSA also establishes certain requirements for the licensing and operation of prescription drug wholesalers
and third party logistics providers (“3PLs”), and includes the eventual creation of national wholesaler and 3PL
licenses in cases where states do not license such entities. The DSCSA requires that wholesalers and 3PLs
distribute drugs in accordance with certain standards regarding the recordkeeping, storage and handling of
prescription drugs. The DSCSA requires wholesalers and 3PLs to submit annual reports to the FDA, which include
information regarding each state where the wholesaler or 3PL is licensed, the name and address of each facility and
contact information. According to FDA guidance, states are pre-empted from imposing any licensing requirements
that are inconsistent with, less stringent than, directly related to, or covered by the standards established by federal
law in this area. Current state licensing requirements concerning wholesalers will remain in effect until the FDA
issues new regulations as directed by the DSCSA.

The Food and Drug Administration Amendments Act of 2007 and the Food and Drug Administration Safety and
Innovation Act of 2012 amended the FDC Act to require the FDA to promulgate regulations to implement a unique
device identification (“UDI”) system. The UDI rule phased in the implementation of the UDI regulations, generally
beginning with the highest-risk devices (i.e., Class III medical devices) and ending with the lowest-risk devices. The
UDI regulations require “labelers” to include unique device identifiers (“UDIs”), with a content and format prescribed
by the FDA and issued under a system operated by an FDA-accredited issuing agency, on the labels and packages
of medical devices (including, but not limited to, certain software that qualifies as a medical device under FDA
rules), and to directly mark certain devices with UDIs. The UDI regulations also require labelers to submit certain
information concerning UDI-labeled devices to the FDA, much of which information is publicly available on an FDA
database, the Global Unique Device Identification Database. Regulated labelers include entities such as device
manufacturers, repackagers, reprocessors and relabelers that cause a device’s label to be applied or modified, with
the intent that the device will be commercially distributed without any subsequent replacement or modification of the
label, and include certain of our businesses.

Under the Controlled Substances Act, as a distributor of controlled substances, we are required to obtain and renew
annually registrations for our facilities from the U.S. Drug Enforcement Administration (“DEA”) permitting us to
handle controlled substances. We are also subject to other statutory and regulatory requirements relating to the
storage, sale, marketing, handling and distribution of such drugs, in accordance with the Controlled Substances Act
and its implementing regulations, and these requirements have been subject to heightened enforcement activity in
recent times. We are subject to inspection by the DEA. There have also been increasing efforts by various levels of
government globally to regulate the pharmaceutical distribution system in order to prevent the introduction of
counterfeit, adulterated or misbranded pharmaceuticals into the distribution system.

Certain of our businesses are also required to register for permits and/or licenses with, and comply with operating
and security standards of, the DEA, the FDA, the U.S. Department of Health and Human Services, and various
state boards of pharmacy, state health departments and/or comparable state agencies as well as comparable
foreign agencies, and certain accrediting bodies depending on the type of operations and location of product
distribution, manufacturing or sale. These businesses include those that distribute, manufacture and/or repackage
prescription pharmaceuticals and/or medical devices and/or HCT/P products, or own pharmacy operations, or
install, maintain or repair equipment. In addition, Section 301 of the National Organ Transplant Act, and a number of
comparable state laws, impose civil and/or criminal penalties for the transfer of certain human tissue (for example,

human bone products) for valuable consideration, while generally permitting payments for the reasonable costs
incurred in procuring, processing, storing and distributing that tissue. We are also subject to foreign government
regulation of such products. The DEA, the FDA and state regulatory authorities have broad inspection and
enforcement powers, including the ability to suspend or limit the distribution of products by our fulfillment centers,
seize or order the recall of products and impose significant criminal, civil and administrative sanctions for violations
of these laws and regulations. Foreign regulations subject us to similar foreign enforcement powers. Furthermore,
compliance with legal requirements has required and may in the future require us to delay product release, sale or
distribution, or institute voluntary recalls of products we sell, each of which could result in regulatory and
enforcement actions, financial losses and potential reputational harm. Our customers are also subject to significant
federal, state, local and foreign governmental regulation, which may affect our interactions with customers, including
the design and functionality of the products we distribute.

Certain of our businesses are subject to various additional federal, state, local and foreign laws and regulations,
including with respect to the sale, transportation, storage, handling and disposal of hazardous or potentially
hazardous substances, and safe working conditions. In addition, certain of our businesses must operate in
compliance with a variety of burdensome and complex billing and record keeping requirements in order to
substantiate claims for payment under federal, state and commercial healthcare reimbursement programs.

Certain of our businesses also maintain contracts with governmental agencies and are subject to certain regulatory
requirements specific to government contractors.

As disclosed in our prior periodic reports, our subsidiary Animal Health International was recently the subject of an
investigation by the U.S. Attorney’s Office for the Western District of Virginia, which resulted in Animal Health
International pleading guilty to a strict-liability misdemeanor offense in connection with its failure to comply with
federal law relating to the sales of prescription animal health products, and a total criminal fine and forfeiture of
$52.8 million. In addition, Animal Health International and Patterson entered into a non-prosecution agreement for
other non-compliant licensing, dispensing, distribution and related sales processes disclosed during the
investigation and committed to undertake additional compliance program enhancements and provide compliance
certifications through fiscal 2023. This matter may continue to divert management's attention and cause us to suffer
reputational harm. We also may be subject to other fines or penalties, equitable remedies (including but not limited
to the suspension, revocation or non-renewal of licenses) and litigation. The occurrence of any of these events
could adversely affect our business, financial condition and results of operations.

Antitrust and Consumer Protection

The federal government of the United States, most U.S. states and many foreign countries have antitrust laws that
prohibit certain types of conduct deemed to be anti-competitive, as well as consumer protection laws that seek to
protect consumers from improper business practices. At the U.S. federal level, the Federal Trade Commission
oversees enforcement of these types of laws, and states have similar govern agencies. Violations of antitrust or
consumer protection laws may result in various sanctions, including criminal and civil penalties. Private plaintiffs
also may bring, and have brought, civil lawsuits against us in the U.S. for alleged antitrust violations, including
claims for treble damages.

Health Care Fraud

Certain of our businesses are subject to federal and state (and similar foreign) health care fraud and abuse, referral
and reimbursement laws and regulations with respect to their operations. Some of these laws, referred to as “false
claims laws,” prohibit the submission or causing the submission of false or fraudulent claims for reimbursement to
federal, state and other health care payers and programs. Other laws, referred to as “anti-kickback laws,” prohibit
soliciting, offering, receiving or paying remuneration in order to induce the referral of a patient or ordering,
purchasing, leasing or arranging for or recommending ordering, purchasing or leasing, of items or services that are
paid for by federal, state and other health care payers and programs. Several states apply their false claims and
anti-kickback laws to all payers, including goods and services paid for directly by consumers. Certain additional
state and federal laws, such as the federal Physician Self-Referral Law, commonly known as the “Stark Law,”
prohibit physicians and other health professionals from referring a patient to an entity with which the physician (or
family member) has a financial relationship, for the furnishing of certain designated health services (for example,
durable medical equipment and medical supplies), unless an exception applies.

The fraud and abuse laws and regulations have been subject to heightened enforcement activity over the past few
years, and significant enforcement activity has been the result of “relators,” who serve as whistleblowers by filing
complaints in the name of the U.S. (and, if applicable, particular states) under applicable false claim laws. Under the

federal False Claims Act, relators can be entitled to receive up to 30% of the total recoveries. Penalties under fraud
and abuse laws may be severe, and could result in significant civil and criminal penalties and costs, including the
loss of licenses and the ability to participate in federal and state health care programs, and could have a material
adverse effect on our business. Also, these measures may be interpreted or applied by a prosecutorial, regulatory
or judicial authority in a manner that could require us to make changes in our operations or incur substantial
defense and settlement expenses. Even unsuccessful challenges by regulatory authorities or private relators could
result in reputational harm and the incurring of substantial costs. Most states have adopted similar state false claims
laws, and these state laws have their own penalties which may be in addition to federal False Claims Act penalties.

Health Care Reform

The U.S. Patient Protection and Affordable Care Act as amended by the Health Care and Education Reconciliation
Act (the “Health Care Reform Law”) increased federal oversight of private health insurance plans and included a
number of provisions designed to reduce Medicare expenditures and the cost of health care generally, to reduce
fraud and abuse, and to provide access to increased health coverage. The continued uncertain status of the Health
Care Reform Law affects our ability to plan.

A Health Care Reform Law provision, generally referred to as the Physician Payment Sunshine Act or Open
Payments Program (the “Sunshine Act”), has imposed reporting and disclosure requirements for drug and device
manufacturers and distributors with regard to payments or other transfers of value made to certain practitioners
(including physicians, dentists and teaching hospitals), and for such manufacturers and distributors and for group
purchasing organizations, with regard to certain ownership interests held by physicians in the reporting entity. The
Centers for Medicare and Medicaid Services (“CMS”) publishes information from these reports on a publicly
available website, including amounts transferred and physician, dentist and teaching hospital identities.
Amendments expanded the law to also require reporting, effective Jan. 1, 2022, of payments or other transfers of
value to physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists,
and certified nurse-midwives, and this new requirement is effective for data collected beginning in calendar year
2021.

The Sunshine Act pre-empts similar state reporting laws, although we or our subsidiaries may also be required to
report under certain state transparency laws that address circumstances not covered by the Sunshine Act, and
some of these state laws, as well as the federal law, can be ambiguous. We are also subject to foreign regulations
requiring transparency of certain interactions between suppliers and their customers. Our compliance with these
rules imposes additional costs on us.

In addition, recently there has been increased scrutiny on drug pricing and concurrent efforts to control or reduce
drug costs by Congress, the President, and various states, including that several related bills have been introduced
at the federal level. Such legislation, if enacted, could have the potential to impose additional costs on our business.

Regulated Software; Electronic Health Records

The FDA has become increasingly active in addressing the regulation of computer software and digital health
products intended for use in health care settings, and has developed and continues to develop policies on
regulating clinical decision support tools and other types of software as medical devices. Certain of our software and
related products support practice management, and it is possible that the FDA or foreign government authorities
could determine that one or more of our products is a medical device, which could subject us or one or more of our
businesses to substantial additional requirements with respect to these products.

In addition, certain of our practice management products include electronic information technology systems that
store and process personal health, clinical, financial and other sensitive information of individuals. These
information technology systems may be vulnerable to breakdown, wrongful intrusions, data breaches and malicious
attack, which could require us to expend significant resources to eliminate these problems and address related
security concerns, and could involve claims against us by private parties and/or governmental agencies. For
example, we are directly or indirectly subject to numerous and evolving federal, state, local and foreign laws and
regulations that protect the privacy and security of such information, such as the privacy and security provisions of
the federal Health Insurance Portability and Accountability Act of 1996, as amended, and implementing regulations
(“HIPAA”), the Controlling the Assault of Non-Solicited Pornography and Marketing Act, the Telephone Protection
and Electronic Protection Act of 1991, Section 5 of the Federal Trade Commission Act, the California Privacy Act
(“CCPA”), and the California Privacy Rights Act (“CPRA”) that becomes effective on January 1, 2023. Our
businesses’ failure to comply with these laws and regulations could expose us to breach of control claims,
substantial fines, penalties and other liabilities and expenses, costs for remediation and harm to our reputation.

Also, evolving laws and regulations in this area could restrict the ability of our customers to obtain, use or
disseminate patient information, or could require us to incur significant additional costs to re-design our products to
reflect these legal requirements, which could have a material adverse effect on our operations.

Other health information standards, such as regulations under HIPAA, establish standards regarding electronic
health data transmissions and transaction code set rules for specific electronic transactions, such as transactions
involving claims submissions to third party payers. Certain of our electronic practice management products must
meet these requirements. Failure to abide by these and other electronic health data transmission standards could
expose us to breach of contract claims, substantial fines, penalties and other liabilities and expenses, costs for
remediation and harm to our reputation.

Also, the European Parliament and the Council of the European Union adopted the pan-European General Data
Protection Regulation (“GDPR”), effective from May 2018, which increased privacy rights for individuals in Europe,
including individuals who are our customers, suppliers, and employees. The GDPR extended the scope of
responsibilities for data controllers and data processors, and generally imposes increased requirements and
potential penalties on companies that offer goods or services to individuals who are located in Europe (“Data
Subjects”) or monitor their behavior (including by companies based outside of Europe). Noncompliance can result in
penalties of up to the greater of EUR 20 million, or 4% of global company revenues, and Data Subjects may seek
damages. Individual member states may impose additional requirements and penalties regarding certain matters
such as employee personal data. With respect to the personal data it protects, the GDPR requires, among other
things, company accountability, consents from Data Subjects or other acceptable legal basis to process the
personal data, breach notifications within 72 hours, data integrity and security, and fairness and transparency
regarding the storage, use or other processing of the personal data. The GDPR also provides rights to Data
Subjects relating notably to information, access, modification, erasure and transporting of the personal data.

In the United States, the CCPA, which increases the privacy protections afforded California residents, became
effective on January 1, 2020. The CCPA generally requires companies, such as us, to institute additional protections
regarding the collection, use and disclosure of certain personal information of California residents. Compliance with
the new obligations imposed by the CCPA depends in part on how particular regulators interpret and apply them,
because the CCPA is relatively new, and its implementing regulations were released in August of 2020, there
remains some uncertainty about how the CCPA will be interpreted by the courts and enforced by the regulators. If
we fail to comply with the CCPA or if regulators assert that we have failed to comply with the CCPA, we may be
subject to certain fines or other penalties and litigation, any of which may negatively impact our reputation, require
us to expend significant resources, and harm our business. Furthermore, California voters approved the CPRA on
November 3, 2020, which will amend and expand the CCPA, including by providing consumers with additional rights
with respect to their personal information, and creating a new state agency to enforce the CCPA and the CPRA. The
CPRA will come into effect on January 1, 2023, applying to information collected by business on or after January 1,
2022.

Other states, as well as the federal government, have increasingly considered the adoption of similarly expansive
personal privacy laws, backed by significant civil penalties for non-compliance. While we believe we have
substantially compliant programs and controls in place to comply with the GDPR, CCPA and CPRA requirements,
our compliance with these measures is likely to impose additional costs on us, and we cannot predict whether the
interpretations of the requirements, or changes in our practices in response to new requirements or interpretations
of the requirements, could have a material adverse effect on our business.

We also sell products and services that health care providers use to store and manage patient medical or dental
records. These customers, and we, are subject to laws, regulations and industry standards, such as HIPAA and the
Payment Card Industry Data Security Standards, which require the protection of the privacy and security of those
records, and our products may also be used as part of these customers’ comprehensive data security programs,
including in connection with their efforts to comply with applicable privacy and security laws. Perceived or actual
security vulnerabilities in our products or services, or the perceived or actual failure by us or our customers who use
our products or services to comply with applicable legal or contractual data privacy or security requirements, may
not only cause us significant reputational harm, but may also lead to claims against us by our customers and/or
governmental agencies and involve substantial fines, penalties and other liabilities and expenses and costs for
remediation.

E-Commerce

Electronic commerce solutions have become an integral part of traditional health care supply and distribution
relationships. Our distribution business is characterized by rapid technological developments and intense
competition. The continuing advancement of online commerce requires us to cost-effectively adapt to changing
technologies, to enhance existing services and to develop and introduce a variety of new services to address the
changing demands of consumers and our customers on a timely basis, particularly in response to competitive
offerings.

Through our proprietary, technologically based suite of products, we offer customers a variety of competitive
alternatives. We believe that our tradition of reliable service, our name recognition and large customer base built on
solid customer relationships, position us well to participate in this significant aspect of the distribution business. We
continue to explore ways and means to improve and expand our Internet presence and capabilities, including our
online commerce offerings and our use of various social media outlets.

International Transactions

U.S. and foreign import and export laws and regulations require us to abide by certain standards relating to the
importation and exportation of products. We also are subject to certain laws and regulations concerning the conduct
of our foreign operations, including the Foreign Corrupt Practices Act and other anti-bribery laws and laws pertaining
to the accuracy of our internal books and records, as well as other types of foreign requirements similar to those
imposed in the U.S.

There can be no assurance that regulations that impact our business or customers’ practices will not have a
material adverse effect on our business. As a result of political, economic and regulatory influences, the health care
distribution industry in the U.S. is under intense scrutiny and subject to fundamental changes. We cannot predict
what further reform proposals, if any, will be adopted, when they may be adopted, or what impact they may have on
us.

See “Item 1A. Risk Factors” for a discussion of additional burdens, risks and regulatory developments that may
affect our results of operations and financial condition.

Proprietary Rights

We hold trademarks relating to the “Patterson®” name and logo, as well as certain other trademarks. Our U.S.
trademark registrations have 10-year terms, and may be renewed for additional 10-year terms. We intend to protect
our trademarks to the fullest extent practicable.

Human Capital

People are the most important part of Patterson. Our employees are the reason we can confidently say we offer
Trusted Expertise, Unrivaled Support to our customers every day.

As of April 24, 2021, we had approximately 7,800 full-time employees. We have not experienced a shortage of
qualified personnel in the past and believe that we will be able to attract such employees in the future. We believe
our relations with employees to be good.

Patterson has been on a multi-year culture transformation that involves listening to, engaging with, and enabling our
team. Our culture is driven by our purpose, vision, and values:

We believe that a diverse and inclusive workforce makes our company stronger, and we encourage our teams to
bring their authentic selves to Patterson every day. Our UNITES team is composed of volunteer Patterson team
members and their executive sponsors drive four pillars of diversity and inclusion: Community Engagement,
Leadership Development, Employee Engagement, and Talent Acquisition. We have also developed a mentorship
initiative to advance the growth and development of women leaders, and supported the launch of employee-led
affinity groups including Patterson UNITES LGBTQA. As of April 24, 2021, 40.9% of our U.S. workforce and 37.8%
of our management was female. In addition, as of that date, 20.4% of our U.S. workforce and 13.4% of our
management was ethnically diverse.

During calendar 2020, to protect our employees and reduce the spread of COVID-19 in our communities during the
pandemic, we implemented numerous new guidelines – from travel restrictions to staggered work schedules to
extra protocols at our essential facilities. Every team member who could work remotely did so, and we implemented
tools and resources to support our team members’ health and financial well-being by providing paid time off for
those who were quarantined or those who needed to support distance learning for school-age children.

Available Information

We make available free of charge through our website, www.pattersoncompanies.com, our Annual Report on Form
10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, statements of beneficial ownership of
securities on Forms 3, 4 and 5 and amendments to these reports and statements filed or furnished pursuant to
Section 13(a) and Section 16 of the Securities Exchange Act of 1934 as soon as reasonably practicable after such
materials are electronically filed with, or furnished to, the U.S. Securities and Exchange Commission, or SEC. This
material may be accessed by visiting the Investor Relations section of our website.

In addition, the SEC maintains an Internet website at www.sec.gov, where the above information can be viewed.

Information relating to our corporate governance, including our Code of Conduct, and information concerning
executive officers, Board of Directors and Board committees, and transactions in Patterson securities by directors
and officers, is available on or through our website, www.pattersoncompanies.com in the Investor Relations section.

Information maintained on the website is not being included as part of this Annual Report on Form 10-K.

Information About Our Executive Officers

Set forth below is the name, age and position of the executive officers of Patterson, who are elected annually and
serve at the discretion of our Board of Directors, as of June 16, 2021.

Mark S. Walchirk

Donald J. Zurbay
Kevin M. Pohlman
Eric Shirley

Les B. Korsh

55 President and Chief Executive Officer, Director - Patterson

Companies, Inc.

53 Chief Financial Officer - Patterson Companies, Inc.
58 President - Patterson Animal Health
55 President - Patterson Dental
51 Vice President, General Counsel and Secretary - Patterson

Companies, Inc.

Andrea Frohning

51 Chief Human Resources Officer - Patterson Companies, Inc.

Background of Executive Officers

Mark S. Walchirk became our President and Chief Executive Officer in November 2017. Mr. Walchirk previously
served as President of U.S. Pharmaceutical at McKesson Corporation from October 2012 to October 2017, where
he held responsibility for McKesson’s U.S. Pharmaceutical sales, distribution and customer service operations. Mr.
Walchirk joined McKesson in April 2001 and held various leadership positions including President of McKesson
Specialty Care Solutions and Chief Operating Officer of McKesson U.S. Pharmaceutical. Before joining McKesson,
he spent 13 years in medical-surgical distribution and manufacturing with Baxter Healthcare, Allegiance Healthcare
and Encompass Group, holding various leadership positions in sales, marketing, operations and business
development. Mr. Walchirk brings strategic and leadership experience, including healthcare services and distribution
experience, to our Board.

Donald J. Zurbay became our Chief Financial Officer in June 2018. Mr. Zurbay most recently served as Vice
President and Chief Financial Officer at global medical device manufacturer St. Jude Medical, Inc. from August
2012 through the January 2017 acquisition of St. Jude Medical by Abbott Laboratories. At St. Jude Medical,
Mr. Zurbay was responsible for all accounting, financial and business development activities. He joined St. Jude
Medical in 2003 and held various leadership positions, including Director of Finance and Vice President and
Corporate Controller. Prior to joining St. Jude Medical, Mr. Zurbay worked at PricewaterhouseCoopers for five years
as an Assurance and Business Advisory Services Senior Manager. Before joining PricewaterhouseCoopers, he was
a General Accounting Manager at The Valspar Corporation. Mr. Zurbay started his career at Deloitte & Touche as an
auditor in 1989. In terms of public company board service, Mr. Zurbay served as a director of Avedro, Inc. from its
February 2019 initial public offering through its November 2019 sale, and he has served as a director of Silk Road
Medical, Inc. since its April 2019 initial public offering.

Kevin M. Pohlman became President of Patterson Animal Health in July 2017. Mr. Pohlman joined Animal Health
International, Inc., which was acquired by Patterson in 2015, in August 2001 and was previously its Vice President
of Sales and Marketing. Prior to assuming that role, Mr. Pohlman was President of Corporate Sales and Marketing.
Beginning in 2001, Mr. Pohlman held a variety of leadership roles, including Vice President of Dealer Sales with
oversight of the Marketing department until June 2011. Mr. Pohlman began his career with Pohlman Bros. Supply, a
family-owned dealer and distributor of dairy equipment, animal health supplies and food plan supplies in Ohio.

Eric Shirley became President of Patterson Dental in January 2019. He most recently served as Chief Commercial
Officer at Midmark, a leading provider of medical, dental and veterinary equipment, technology and services. In this
role, Mr. Shirley was responsible for driving revenue, marketing and operational efficiency within the company’s
dental, medical and animal health divisions. Mr. Shirley was employed by Midmark from 2004 to 2019. Prior to his
time at Midmark, Mr. Shirley held leadership positions at Dentsply Preventive Care, Dentsply International and
several other dental manufacturers.

Les B. Korsh became Vice President, General Counsel and Secretary of Patterson in July 2015. Mr. Korsh served
as Patterson’s Associate General Counsel since June 2014. Prior to joining Patterson, Mr. Korsh held positions as
Vice President and Associate General Counsel for MoneyGram International, Inc. from May 2004 to May 2014,
where he managed MoneyGram’s commercial and state regulatory teams in the United States. Additionally, Mr.
Korsh was a principal in the law firm of Gray Plant Mooty, P.A. from June 1999 to May 2004, where he focused his
practice on emerging growth companies including financings, acquisitions and divestitures and corporate
governance. He has served as a director of the Patterson Foundation since June 2016.

Andrea Frohning became our Chief Human Resources Officer in May 2018. Ms. Frohning joined Patterson from
Snyder’s-Lance where she held the role of Senior Vice President, Chief Human Resources Officer from March 2016
to March 2018, and was responsible for leading all aspects of the company’s human resources. Prior to her tenure
at Snyder’s-Lance, she was Vice President Human Resources at Crane Co. from November 2013 to February
2016. Ms. Frohning also held other human resource managerial positions at Hubbell Inc., General Electric
Consumer Finance and Pepsi Bottling Group.

Item 1A. RISK FACTORS

We believe that the following risks could have a material adverse impact on our business, reputation, financial
results, financial condition and/or the trading price of our common stock. In addition, our business operations could
be affected by factors that are not presently known to us or that we currently consider not to be material to our
operations, so you should not consider the risks disclosed in this section to necessarily represent a complete
statement of all risks and uncertainties. The order in which these factors appear does not necessarily reflect their
relative importance or priority.

COMPANY RISKS

The COVID-19 pandemic and measures taken in response thereto had, and may continue to have, adverse
effects on our results of operations and our financial condition, and the full impact of the pandemic will
depend on future developments, which are highly uncertain and cannot be predicted.

Global health concerns relating to the COVID-19 pandemic have had, and continue to have, an unprecedented
impact on the macroeconomic environment, and the pandemic has significantly increased unemployment and
economic uncertainty. Beginning in March 2020, across our markets authorities implemented numerous measures
to try to contain the virus, such as travel bans and restrictions, quarantines, shelter in place orders, and business
shutdowns, and continued to implement such measures as new waves of infection developed. These measures had
negative impacts on consumer spending and business spending habits that adversely impacted our financial results
and the financial results of our customers, suppliers and business partners during fiscal 2021, and are expected to
continue to have negative impacts into fiscal 2022.

Actual and potential impacts on us from the COVID-19 pandemic include, but are not limited to:

•

Interruptions in the operations of industries in which the products we distribute are used. Our fiscal 2021
results were adversely affected by mandated and voluntary restrictions on the operations of dental and
veterinary offices across the U.S., Canada and the UK to limit the spread of COVID-19 beginning in March
2020, along with consumers delaying elective visits even when offices were open. These restrictions have
begun to ease across our markets, but continuing economic uncertainty remains. In addition, the
interruptions in meatpacking operations that occurred due to the pandemic factored into the full goodwill
impairment of the animal health business in fiscal 2020. We have also been affected by, and continue to be
affected by, disruptions in the swine market.

Limited supply of the personal protective equipment (PPE) necessary for dental practice and veterinary care
of companion animals followed by related inventory write down. Supply chain disruptions for 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. 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.

Reduction in peoples’ ability and willingness to be in public. Consumer behavior was materially changed by
mandates and recommendations designed to slow and limit the transmission of COVID-19 (including
business closures and restrictions, stay-at-home and similar measures), beginning in March 2020. While
such restrictions have generally been lifted or are expected to be lifted, consumer behavior remains
uncertain and will depend on the actual and potential for additional resurgences of COVID-19.

•

Risks of remote work. Most of our corporate employees shifted abruptly to working remotely under stay-at-
home orders imposed in March 2020, and many of our corporate employees continue to work remotely. Our
rapid transition to remote work arrangements for corporate employees could expose us to continuing
cybersecurity risk.

Refocusing management resources. Mitigating the effects of COVID-19 has required, and will likely
continue to require for the duration of the pandemic, a large investment of time and resources across our
company, and may delay certain strategic and other plans which could materially adversely affect our
business.

Reputational risk associated with response to COVID-19. If we do not respond appropriately to the
COVID-19 pandemic, or if customers do not perceive our response to be adequate, we could suffer damage
to our reputation and our brands, which could materially adversely affect our business.

Interruptions in manufacturing or distribution of products we distribute. Outbreaks in the communities in
which we operate could affect our ability to operate our distribution activities, and our suppliers could
experience similar manufacturing interruptions.

Even after COVID-19 has subsided, we may continue to experience materially adverse impacts to our business as a
result of its global economic impact, including any recession that has occurred or may occur in the future. There are
no comparable recent events which may provide guidance as to the effect of the spread of COVID-19, and, as a
result, the ultimate impact of COVID-19, or a similar health epidemic or pandemic, is highly uncertain and subject to
change. We do not yet know the full extent of the impacts on our dental and animal health businesses, our
operations or the global economy as a whole. However, the effects could have a material impact on our results of
operations. The impact of COVID-19 may also exacerbate other risks discussed below, any of which could have a
material adverse impact on us.

Customer retention and business development depend heavily on our relationships with our sales
representatives and service technicians, who interact directly with our customers, and the technological
products and services we offer.

The inability to attract or retain qualified employees, particularly sales representatives and service technicians who
relate directly with our customers, or our inability to build or maintain relationships with customers in the dental and
animal health markets, may have an adverse effect on our business. Due to the specialized nature of many of the
products and services we distribute, generally only highly qualified and trained personnel have the necessary skills
to market such products and provide such services. These individuals develop relationships with our customers that
could be damaged if these employees are not retained. We face intense competition for the hiring of these
professionals, and many professionals in the field that may otherwise be attractive candidates for us to hire may be
bound by non-competition agreements with our competitors. Any failure on our part to hire, train and retain a
sufficient number of qualified professionals would damage our business.

Due to generational and other trends in the dental and animal health industries, our customer base is increasingly
interested in having the latest technologies to manage their business. In order to effectively offer solutions that keep
pace with rapidly changing technologies and customer expectations, we must acquire, develop or offer new
technology products and solutions. If we fail to accurately anticipate and meet our customers’ needs through the
acquisition, development or distribution of new products, technologies and service offerings, if we fail to adequately
protect our intellectual property rights, if the products we distribute and services we provide are not widely accepted
or if current or future offerings fail to meet applicable regulatory requirements, we could lose customers to our
competitors which could materially and adversely affect our results of operations and financial condition. In addition,
if technology investments do not achieve the intended results, we may write-off the investments, and we face the
risk of claims from system users that the systems failed to produce the intended result or negatively affected the
operation of our customers’ businesses. Any such claims could be expensive and time-consuming to defend, cause
us to lose customers and associated revenue, divert management’s attention and resources, or require us to pay
damages.

Disruption to our distribution capabilities, including service issues with our third-party shippers, could
materially adversely affect our results.

Weather, natural disaster, fire, terrorism, pandemic, strikes, civil unrest, geopolitical events or other reasons could
impair our ability to distribute products and conduct our business. If we are unable to manage effectively such
events if they occur, there could be a material adverse effect on our business, financial condition or results of

operations. Similarly, increases in service costs or service issues with our third-party shippers, including strikes or
other service interruptions, could cause our operating expenses to rise and materially adversely affect our ability to
deliver products on a timely basis. We ship almost all of our orders through third-party delivery services, and often
times bear the cost of shipment. Our ability to provide same-day shipping and next-day delivery is an integral
component of our business strategy and any significant increase in shipping rates or service interruptions could
adversely impact our business, financial condition or results of operations.

We are dependent on our suppliers and exposed to the risks of their businesses, because we generally do
not manufacture the products we sell.

We obtain substantially all of the products we distribute from third parties. If a supplier is unable to deliver product in
a timely and efficient manner, whether due to financial difficulties, natural disasters, pandemics, the failure to comply
with applicable government requirements or other reasons, we could experience lost sales.

There is considerable concentration within our animal health and dental businesses with a few key suppliers. In
addition, a portion of the products we distribute is sourced, directly or indirectly, from countries outside the U.S.
including China. Political or financial instability, increased tariffs, restrictions on trade, currency exchange rates,
labor unrest, pandemics or other events could slow distribution activities, affect foreign trade beyond our control and
adversely affect our results of operations.

We generally do not have long-term contracts with our suppliers, so they may be discontinued or changed abruptly.
Changes in the structure of purchasing relationships might include changing from a “buy/sell” to an agency
relationship (or the reverse), or changing the method in which products are taken to market, including the possibility
of creating or expanding a direct sales force or otherwise reducing their reliance on third-party distribution channels.
An extended interruption in the supply of products would have an adverse effect on our results of operations, and a
reduction in our role as a value-added service provider would result in reduced margins on product sales.

The products we sell are subject to market and technological obsolescence; our software products may
contain undetected errors or bugs when released.

Some of the products we distribute are subject to technological obsolescence outside of our control, since we do not
manufacture the majority of the products we sell. If our customers discontinue purchasing a given product, we might
have to record expense related to the diminution in value of inventories we have in stock, and depending on the
magnitude, that expense could adversely impact our operating results.

Our software and applicable e-services products, like software products generally, may contain undetected errors or
bugs when introduced, or as new versions are released. Any such defective software may result in increased
expenses related to the software and could adversely affect our relationships with the customers using such
software, as well as our reputation. We do not have any patents on our software or e-services, and rely upon
copyright, trademark and trade secret laws, as well as contractual and common-law protections. We cannot provide
assurance that such legal protections will be available, adequate or enforceable in a timely manner to protect our
software or e-services products.

Adverse changes in supplier rebates could negatively affect our business.

The terms on which we purchase or sell products from many suppliers of animal health products may entitle us to
receive a rebate based on the attainment of certain growth goals. Suppliers may reduce or eliminate rebates offered
under their programs, or increase the growth goals or other conditions we must meet to earn rebates to levels that
we cannot achieve. Increased competition either from generic or equivalent branded products could result in us
failing to earn rebates that are conditioned upon achievement of growth goals. Additionally, factors outside of our
control, such as customer preferences, consolidation of suppliers or supply issues, can have a material impact on
our ability to achieve the growth goals established by our suppliers, which may reduce the amount of rebates we
receive. The occurrence of any of these events could have an adverse impact on our results of operations.

Sales of private label products entail additional risks, including the risk that such sales could adversely
affect our relationships with suppliers.

We offer certain private label products that are available exclusively from us. The sale of such products subjects us
to the risks generally encountered by entities that source, market and sell private label products, including but not
limited to potential product liability risks, mandatory or voluntary product recalls, potential supply chain and
distribution chain disruptions, and potential intellectual property infringement risks. Any failure to adequately address

some or all of these risks could have an adverse effect on our business, results of operations and financial
condition.

In addition, an increase in the sales of our private label products may negatively affect our sales of products owned
by our suppliers which, consequently, could adversely impact certain of our supplier relationships. Our ability to
locate qualified, economically stable suppliers who satisfy our requirements, and to acquire sufficient products in a
timely and effective manner, is critical to ensuring, among other things, that customer confidence is not diminished.
As a distribution company, any failure to develop sourcing relationships with a broad and deep supplier base could
adversely affect our financial performance and erode customer loyalty.

Patterson’s continued success is substantially dependent on positive perceptions of Patterson’s
reputation.

One of the reasons why customers choose to do business with Patterson and why employees choose Patterson as
a place of employment is the reputation that Patterson has built over many years. To be successful in the future,
Patterson must continue to preserve, grow and leverage the value of Patterson’s brand. Reputational value is based
in large part on perceptions of subjective qualities. Even an isolated incident, or the aggregate effect of individually
insignificant incidents, can erode trust and confidence, particularly if they result in adverse publicity, governmental
investigations or litigation, and as a result, could tarnish Patterson’s brand and lead to adverse effects on our
business, financial condition and results of operations.

Risks inherent in asset or business acquisitions and dispositions could offset the anticipated benefits of
such transactions, and we may face difficulty in efficiently and effectively integrating acquired businesses.

As a part of our business strategy, we acquire and dispose of assets and businesses in the ordinary course and
may continue acquiring and disposing of assets and businesses in the future. These transactions can involve a
number of risks and challenges, any of which could cause significant operating inefficiencies and adversely affect
our growth and profitability, and may not result in the benefits and revenue growth we expect.

Acquisition risks and challenges include underperformance relative to our expectations and the price paid for the
acquisition; unanticipated demands on our management and operational resources; difficulty in integrating
personnel, operations and systems; retention of customers of the combined businesses; assumption of contingent
liabilities; acquisition-related earnings charges; and acquisition-related cybersecurity risks. Additionally, when we
decide to sell assets or a business, we may encounter difficulty in finding buyers or executing alternative exit
strategies on acceptable terms in a timely manner, which could delay the accomplishment of our strategic
objectives. Alternatively, we may dispose of assets or a business at a price or on terms that are less than we had
anticipated. Dispositions may also involve continued financial involvement in a divested business, such as through
continuing equity ownership, transition service agreements, guarantees, indemnities or other current or contingent
financial obligations. Under these arrangements, performance by the acquired or divested business, or other
conditions outside our control, could affect our future financial results.

As we operate through two strategic business units, we consolidate the distribution, information technology, human
resources, financial and other administrative functions of those business units jointly to meet their needs while
addressing distinctions in the individual markets of those segments. We may not be able to do so effectively and
efficiently.

Our ability to continue to make acquisitions will depend upon our success in identifying suitable targets, which
requires substantial judgment in assessing their values, strengths, weaknesses, liabilities and potential profitability,
as well as the availability of suitable candidates at acceptable prices, whether restrictions are imposed by anti-trust
or other regulations, and compliance with the terms and conditions of our credit agreement.

Our credit agreements contain restrictive covenants and additional limits and our other debt instruments
contain cross-default provisions, which limit our business and financing activities.

The covenants under our credit agreements impose restrictions on our business and financing activities, subject to
certain exceptions or the consent of our lenders, including, among other things, limits on our ability to incur
additional debt, create liens, enter into merger, acquisition and divestiture transactions, pay dividends and engage in
transactions with affiliates. The credit agreements contain certain customary affirmative covenants, including
requirements that we maintain maximum consolidated leverage ratios and minimum consolidated interest coverage
ratio, pursuant to which we may be affected by changes in interest rates, and customary events of default. The
terms of agreements governing debt that we may incur in the future may also contain similar covenants.

Our ability to comply with these covenants may be adversely affected by events beyond our control, including
economic, financial and industry conditions. A breach of the credit agreement covenants may result in an event of
default, which could allow our lenders to terminate the commitments under the credit agreement, declare all
amounts outstanding under the credit agreement, together with accrued interest, to be immediately due and
payable, and exercise other rights and remedies, and, through cross-default provisions, would entitle our other
lenders to accelerate their loans. If this occurs, we may not be able to refinance the accelerated indebtedness on
acceptable terms, or at all, or otherwise repay the accelerated indebtedness.

Leadership development and succession planning are key to our future success.

While our Board of Directors and management actively monitor our succession plans and processes for our
executive leadership team, our business could suffer if we lose key personnel unexpectedly. In addition, competition
for senior management is intense and we may not be successful in attracting and retaining key personnel.

Our governing documents, other documents to which we are a party, and Minnesota law may discourage
takeovers and business combinations that our shareholders might consider to be in their best interests.

Anti-takeover provisions of our articles of incorporation, bylaws, and Minnesota law could diminish the opportunity
for shareholders to participate in acquisition proposals at a price above the then-current market price of our
common stock. For example, while we have no present plans to issue any preferred stock, our Board of Directors,
without further shareholder approval, may issue up to approximately 30 million shares of undesignated preferred
stock and fix the powers, preferences, rights and limitations of such class or series, which could adversely affect the
voting power of our common stock. Further, as a Minnesota corporation, we are subject to provisions of the
Minnesota Business Corporation Act, or MBCA, regarding “control share acquisitions” and “business combinations.”
We may also, in the future, consider adopting additional anti-takeover measures. In addition, certain equity plans
predating our 2015 Omnibus Incentive Plan provide for acceleration of awards thereunder upon a change in control
or other events of acceleration, as defined in those plans. The foregoing, and any future anti-takeover measures
adopted by us, may, in certain circumstances, delay, deter or prevent takeover attempts and other changes in
control of our company not approved by our Board of Directors.

INDUSTRY RISKS

The dental and animal health supply markets are highly competitive and consolidating, and we may not be
able to compete successfully.

Our competitors include national, regional and local full-service distributors, mail-order distributors and Internet-
based businesses. Some of our competitors have greater resources than we do, or operate through different sales
and distribution models that could allow them to compete more successfully.

Most of the products we distribute are available from multiple sources, and our customers tend to have relationships
with several different distributors who can fulfill their orders. If any of our competitors are more successful with
respect to any key competitive factor such as technological advances or low-cost business models with the ability to
operate at high gross margins, our sales and profitability could be adversely affected. Increased competition from
any supplier of dental or animal health products could adversely impact our financial results. Additional competitive
pressure could arise from, among other things, limited demand growth or a significant number of additional
competitive products or services being introduced into a particular market, the emergence of new competitors, the
unavailability of products, price reductions by competitors, and the ability of competitors to capitalize on their
economies of scale. Manufacturers also could increase their efforts to sell directly to end-users and thereby
eliminate or reduce the role of distributors. These suppliers could sell their products at lower prices and maintain a
higher gross margin on product sales than we can. In addition, our ability to deliver market growth is challenged by
an animal health product mix that is weighted toward lower growth, lower margin parts of the value chain.

Consolidation has increased among manufacturers as well as distributors, which could cause the industry to
become more competitive as greater economies of scale are achieved by competitors, or as competitors with lower
cost business models are able to offer lower prices but retain high gross margin. In addition, in recent years there
has also been a trend towards consolidation in the industries that buy the products and services we distribute,
including the consolidation of dental practices into larger clinics and dental service organizations, the consolidation
of veterinary practices as well as producers, and the formation of group purchasing organizations, provider networks
and buying groups designed to leverage volume discounts. We also face pricing pressure from branded
pharmaceutical manufacturers which could adversely affect our sales and profitability. We may be unable to

anticipate and effectively respond to competitive change, and our failure to compete effectively may limit and/or
reduce our revenue, profitability and cash flow.

Our animal health segment is exposed to the risks of the production animal business, including changes in
consumer demand for food animal products, the cyclical livestock market, and other factors outside our
control.

Demand for our production animal health products can be negatively influenced by factors including: poor weather
conditions such as drought, which raise feed prices and cause producers to reduce herd size; changes in consumer
preferences away from food animal products; supply chain disruptions including due to cyberattack, as happened to
meat company JBS SA in June 2021, or actions by animal rights activists; and outbreaks of diseases affecting
animals, any of which could reduce herd sizes or affect consumer preferences. Reductions in herd size would
ultimately decrease the demand for the products we distribute, including micro feed ingredients, animal health
products, and dairy sanitation solutions, as well as the development and implementation of systems for feed, health,
information and production animal management.

In addition, there has been consumer concern and consumer activism with respect to additives (including, without
limitation, antibiotics and growth promotants) used in the production of animal products, including growing consumer
sentiment for proteins and dairy products produced without the use of antibiotics or other products intended to
increase animal production. These concerns have resulted in increased regulation and changing market demand. If
there is an increased public perception that consumption of food derived from animals that utilize additives we
distribute poses a risk to human health, there may be a further decline in the production of those food products and,
in turn, our sales of those products. Furthermore, regulatory restrictions and bans could result in the removal from
market of products in these categories, which would adversely affect the sales and could materially affect the results
of operations from our animal health segment.

The formation of group purchasing organizations (“GPOs”), provider networks and buying groups may
place us at a competitive disadvantage.

The formation of GPOs, provider networks and buying groups may shift purchasing decisions to entities or persons
with whom we do not have a historical relationship and may threaten our ability to compete effectively, which could
in turn negatively impact our financial results. As a full-service distributor with business service capabilities, we
cannot guarantee that we will be able to successfully compete with price-oriented distribution models that more
readily enable the pricing typically demanded by GPOs, provider networks and buying groups.

Increases in over-the-counter sales of and e-commerce options for companion animal products, or sales of
companion animal products from non-veterinarian sources, could adversely affect our business.

Companion animal health products are becoming increasingly available to consumers at competitive prices from
sources other than veterinarians, including human health product pharmacies, Internet pharmacies and big-box
retailers, and consumers are increasingly seeking such alternatives sources of supply for their companion animal
health products. Additionally, major U.S. online e-commerce retailers such as Amazon and Chewy.com are
becoming licensed as veterinary mail order pharmacies to offer pharmacy products directly to consumers in all 50
U.S. states. Even where prescriptions must be written by a veterinarian, companion animal owners may shift to
these services for home delivery. In addition, companion animal owners may substitute human health products for
animal-health products if they deem human health products to be acceptable, lower-cost alternatives.

Decreased emphasis on veterinary visits, and increased consumer choice through familiar e-commerce retailers
could reduce demand for veterinarian-based services and have a material adverse impact on our business. The
continued advancement of online commerce by third parties will require us to cost-effectively adapt to changing
technologies, to enhance existing services and to differentiate our business (including with additional value-added
services) to address changing demands of consumers and our customers on a timely basis. The emergence of such
competition and our inability to anticipate and effectively respond to changes on a timely basis could have a material
adverse effect on our business.

REGULATORY AND LITIGATION RISKS

Change and uncertainty in the health care industry, including continued implementation of the Health Care
Reform, could materially adversely affect our business.

Laws and regulations affecting the health care industry in the U.S. have changed dramatically in recent years, and
we expect that future and pending legislation, rulemaking, and court decisions on legal challenges to the Health
Care Reform Law will further change the landscape. Foreign government authorities may also adopt reforms of their
health systems. We cannot predict what further reform proposals, if any, will be adopted, when they may be
adopted, or what impact they may have on us. The continued uncertain status of the Health Care Reform Law
affects our ability to plan.

Recently, there has been increased scrutiny on drug pricing and concurrent efforts to control or reduce drug costs
by Congress, the President, and various states, including several bills that have been introduced on a federal level.
Such legislation, if enacted, could have the potential to impose additional costs on our business.

One provision of the Health Care Reform Law, the Sunshine Act, requires us to collect and report detailed
information regarding certain financial relationships we have with covered recipients such as physicians, dentists
and teaching hospitals. We may also be required to report under certain state transparency laws that address
circumstances not covered by the Sunshine Act, and some of these state laws, as well as the federal law, can be
ambiguous. We are also subject to foreign regulations requiring transparency of certain interactions between
suppliers and their customers. Our compliance with these rules imposes additional costs on us. In the U.S.,
government actions to seek to increase health-related price transparency may also affect our business.

Failure to comply with existing and future U.S. and foreign laws and regulatory requirements, including
those governing the distribution of pharmaceuticals and controlled substances, could subject us to claims
or otherwise harm our business.

Our business is subject to additional requirements under various local, state, federal and international laws and
regulations applicable to the sale and distribution of, and third-party payment for, pharmaceuticals and medical
devices, and human cells, tissue and cellular and tissue-based products (“HCT/P products”) and animal feed and
supplements. Among other things, such laws, and the regulations promulgated thereunder:

•

regulate the storage and distribution, labeling, packaging, handling, reporting, record keeping, introduction,
manufacturing and marketing of drugs, HCT/P products and medical devices, including requirements with
respect to unique medical device identifiers;

subject us to inspection by the U.S. Food and Drug Administration (“FDA”) and the U.S. Drug Enforcement
Administration (the “DEA”) and similar state authorities;

regulate the storage, transportation and disposal of certain products that are considered hazardous
materials;

regulate the distribution and storage of pharmaceuticals and controlled substances;

require us to advertise and promote our drugs and devices in accordance with applicable FDA
requirements;

require registration with the FDA and the DEA and various state agencies;

require record keeping and documentation of transactions involving drug products;

require us to design and operate a system to identify and report suspicious orders of controlled substances
to the DEA;

require us to manage returns of products that have been recalled and subject us to inspection of our recall
procedures and activities;

impose on us reporting requirements if a pharmaceutical, HCT/P product or medical device causes serious
illness, injury or death.

require manufacturers, wholesalers, repackagers and dispensers of prescription drugs to identify and trace
certain prescription drugs as they are distributed;

require the licensing of prescription drug wholesalers and third-party logistics providers; and

• mandate compliance with standards for the recordkeeping, storage and handling of prescription drugs, and

associated reporting requirements.

There also have been increasing efforts by Congress and state and federal agencies, including state boards of
pharmacy, departments of health, and the FDA, to regulate the pharmaceutical distribution system. The failure to
comply with any of these laws and regulations, or new interpretations of existing laws and regulations, or the
imposition of any additional laws and regulations, could materially adversely affect our business. If it is determined
that we have not complied with these laws, we are potentially subject to penalties including warning letters,
substantial civil and criminal fines and penalties, mandatory recall of product, seizure of product and injunction,
consent decrees, and suspension or limitation of product sale and distribution, all of which could have a material
adverse effect on our business. If we enter into settlement agreements to resolve allegations of non-compliance, we
could be required to make settlement payments or be subject to civil and criminal penalties, including fines and the
loss of licenses. Non-compliance with government requirements could also adversely affect our ability to participate
in federal and state government health care programs, such as Medicare and Medicaid, and damage our reputation.

For example, as disclosed in our prior periodic reports, our subsidiary Animal Health International was recently the
subject of an investigation by the U.S. Attorney’s Office for the Western District of Virginia, which resulted in Animal
Health International pleading guilty to a strict-liability misdemeanor offense in connection with its failure to comply
with federal law relating to the sales of prescription animal health products, and a total criminal fine and forfeiture of
$52.8 million. In addition, Animal Health International and Patterson entered into a non-prosecution agreement for
other non-compliant licensing, dispensing, distribution and related sales processes disclosed during the
investigation and committed to undertake additional compliance program enhancements and provide compliance
certifications through fiscal 2023. This matter may continue to divert management's attention and cause us to suffer
reputational harm. We also may be subject to other fines or penalties, equitable remedies (including but not limited
to the suspension, revocation or non-renewal of licenses) and litigation. The occurrence of any of these events
could adversely affect our business, financial condition and results of operations.

Public concern over the abuse of opioid medications in the U.S., including increased legal and regulatory
action, could negatively affect our business.

Certain governmental and regulatory agencies, as well as state and local jurisdictions, are focused on the abuse of
opioid medications in the U.S. Federal, state and local governmental and regulatory agencies are conducting
investigations of pharmaceutical manufacturers and other pharmaceutical wholesale distributors regarding the
distribution of opioid medications.

While our subsidiaries have been dismissed without prejudice from national class-action opiate litigation, as
disclosed in our prior periodic reports, we could face similar civil claims or governmental investigations in the future.
Managing legal proceedings and responding to government investigations is costly and involves a significant
diversion of management attention. Such proceedings are unpredictable and may develop over lengthy periods of
time. An adverse resolution of lawsuits or investigations may involve substantial monetary penalties and could have
a material and adverse effect on our reputation, business, financial condition and results of operations.

If we fail to comply with laws and regulations relating to health care fraud or other laws and regulations, we
could suffer penalties or be required to make significant changes to our operations, which could materially
adversely affect our business.

We are subject to federal and state (and similar foreign) health care fraud and abuse, referral and reimbursement
laws and regulations, including those referred to as “false claims laws” and “anti-kickback” laws. Health care fraud
measures may implicate, for example, our relationships with pharmaceutical manufacturers, our pricing and
incentive programs for physician and dental practices, and our practice management products that offer billing-
related functionality.

Failure to comply with fraud and abuse laws and regulations could result in significant civil and criminal penalties
and costs, including the loss of licenses and the ability to participate in federal and state health care programs, and
could have a material adverse effect on our business. Also, these measures may be interpreted or applied by a
prosecutorial, regulatory or judicial authority in a manner that could require us to make changes in our operations or
incur substantial defense and settlement expenses. Even unsuccessful challenges by regulatory authorities or
private regulators could result in reputational harm and the incurring of substantial costs. Most states have adopted
similar state false claims laws, and these state laws have their own penalties which may be in addition to federal
False Claims Act penalties, as well as other fraud and abuse laws. In addition, many of these laws are vague or
indefinite and have not been interpreted by the courts, and have been subject to frequent modification and varied
interpretation by prosecutorial and regulatory authorities, increasing the risk of noncompliance.

We are subject to a variety of litigation that could adversely affect our results of operations and financial
condition.

We are subject to a variety of litigation incidental to our business, including product liability claims, intellectual
property claims, employment claims, commercial disputes, governmental inquiries and investigations, and other
matters arising out of the ordinary course of our business, including securities litigation. From time to time we are
named as a defendant in cases as a result of our distribution of products. Additionally, purchasers of private-label
products may seek recourse directly from us, rather than the ultimate product manufacturer, for product-related
claims. Another potential risk we face in the distribution of products is liability resulting from counterfeit or tainted
products infiltrating the supply chain. In addition, some of the products that we transport and sell are considered
hazardous materials. The improper handling of such materials or accidents involving the transportation of such
materials could subject us to liability or legal action that could harm our reputation.

Defending against such claims may divert our management’s attention, may be expensive, and may require that we
pay damage awards or settlements, pay fines or penalties, or become subject to equitable remedies (including but
not limited to the revocation of or non-renewal of licenses) that could adversely affect our business, financial
condition and results of operations. A successful claim brought against us in excess of available insurance or not
covered by insurance or indemnification agreements, or any claim that results in significant adverse publicity against
us, could have a material adverse effect on our business and our reputation. Furthermore, the outcome of litigation
is inherently uncertain.

If we fail to comply with the evolving laws and regulations relating to the confidentiality of sensitive
personal information or standards in electronic health records or transmissions, we could be required to
make significant changes to our products, or incur substantial fines, penalties or other liabilities.

Our practice management products and services include electronic information technology systems that store and
process personal health, clinical, financial and other sensitive information of individuals. Both we and our customers
are subject to numerous and evolving laws, regulations and industry standards, such as HIPAA and the Payment
Card Industry Data Security Standards, which require the protection of the privacy and security of those records.
Furthermore, our products may be used as part of our customers’ comprehensive data security programs, including
in connection with their efforts to comply with applicable privacy and security laws. We are also subject to non-
healthcare-specific requirements of the countries and states in which we operate which govern the handling,
storage, use and protection of personal information, such as the California Consumer Privacy Act, or CCPA, which
is a state statute intended to enhance privacy rights and consumer protection for residents of California, the
California Privacy Rights Act, or CPRA, that will become effective on January 1, 2023, and the pan-European
General Data Protection Regulation, or GDPR.

In addition, the FDA has become increasingly active in addressing the regulation of computer software intended for
use in health care settings, and has developed and continues to develop policies on regulating clinical decision
support tools and other types of software as medical devices. Certain of our software and related products support
practice management, and it is possible that the FDA or foreign government authorities could determine that one or
more of our products is a medical device, which could subject us or one or more of our businesses to substantial
additional requirements with respect to these products.

Both in the U.S. and abroad, these laws and regulations continue to evolve and remain subject to significant
change. In addition, the application and interpretation of these laws and regulations are often uncertain. If we fail to
comply with such laws and regulations, we could be required to make significant changes to our products or
services, or incur substantial fines, penalties, or other liabilities. The costs of compliance with, and the other
burdens imposed by, new or existing laws or regulatory actions may prevent us from selling the products or services
we distribute, or increase the costs of doing so, and may affect our decision to distribute such products or services.
Also, evolving laws and regulations in this area could restrict the ability of our customers to obtain, use or
disseminate patient information, or could require us to incur significant additional costs to conform to these legal
requirements, either of which could have a material adverse effect on our operations.

In addition, the products and services we distribute may be vulnerable to breakdown, wrongful intrusions, data
breaches and malicious attack. Perceived or actual security vulnerabilities in these products or services, or the
perceived or actual failure by us or our customers who use these products or services to comply with applicable
legal or contractual data privacy or security requirements, may not only cause reputational harm and loss of
business, but may also lead to claims against us by our customers and/or governmental agencies and involve
substantial damages, fines, penalties and other liabilities and expenses and costs for remediation.

Tax legislation could materially adversely affect our financial results and tax liabilities.

We are subject to the tax laws and regulations of the United States federal, state and local governments, as well as
foreign jurisdictions which are extremely complex and subject to varying interpretations. From time to time, various
legislative initiatives may be proposed that could materially adversely affect our tax positions. There can be no
assurance that our effective tax rate will not be materially adversely affected by legislation resulting from these
initiatives. In addition, although we believe that our historical tax positions are sound and consistent with applicable
laws, regulations and existing precedent, there can be no assurance that our tax positions will not be challenged by
relevant tax authorities or that we would be successful in any such challenge.

Our international operations are subject to inherent risks that could adversely affect our operating results.

There are a number of risks inherent in foreign operations, including the U.S. Foreign Corrupt Practices Act and the
U.K. Bribery Act, complex regulatory requirements, staffing and management complexities, import and export costs,
other economic factors and political considerations, all of which are subject to unanticipated changes.

Our foreign operations also expose us to foreign currency fluctuations. Because our financial statements are
denominated in U.S. dollars, changes in currency exchange rates between the U.S. dollar and other currencies will
have an impact on our income. Currency exchange rate fluctuations may adversely affect our results of operations
and financial condition. Furthermore, we generally do not hedge translation exposure with respect to foreign
operations.

GENERAL RISKS

Risks generally associated with information systems and cyber-security attacks could adversely affect our
results of operations.

We rely on information systems (“IS”) in our business to obtain, rapidly process, analyze and store customer,
product, supplier, and employee data to conduct our business. However, our IS are vulnerable to natural disasters,
power losses, computer viruses, telecommunication failures, cybersecurity threats, and other problems. We
increasingly rely upon server- and Internet-based technologies to run our business and to store our data and our
customers’ data, which depends on continuous Internet access in order to run our business and may carry
additional cyber-security risks relative to those posed by legacy technologies.

Despite our efforts to ensure the integrity of our systems, as cyber threats evolve and become more difficult to
detect and successfully defend against, one or more cyber threats might defeat the measures that we or our
vendors take to anticipate, detect, avoid or mitigate such threats. Data breaches and any unauthorized access or
disclosure of our information could compromise our intellectual property and expose sensitive business information.
Cyber-attacks could also cause us to incur significant remediation costs, disrupt key business operations, and divert
attention of management.

Further, our suppliers, our customers, and other market participants are similarly subject to information system and
cybersecurity risk, and a material disruption in their business could result in reduced revenue for us. For example, in
June 2021 a ransomware attack on Brazil-based JBS SA, the world’s largest meat company by sales, took a
significant portion of U.S. beef and pork processing offline, disrupting markets.

In addition, compliance with evolving privacy and information security laws and standards may result in significant
additional expense due to increased investment in technology and the development of new operational processes.
We could be subject to liability for failure to comply with these laws and standards, failure to protect information, or
failure to respond appropriately to an incident or misuse of information, including use of information for unauthorized
marketing purposes.

Our results of operations and cash flows could be adversely affected if our IS are interrupted, damaged by
unforeseen events, are subject to cyber-security attacks, or fail for any extended period of time. Disaster recovery
plans, where in place, might not adequately protect us in the event of a system failure. Despite any precautions we
take, damage from fire, floods, hurricanes, power loss, telecommunications failures, computer viruses, break-ins
and similar events at our various computer facilities could result in interruptions in the flow of data to our servers.
We may need to expend additional resources in the future to continue to protect against, or to address problems
caused by, any business interruptions or data security breaches.

We may experience significant disruptions in our operations resulting from our enterprise resource
planning system.

We depend on our information technology systems and our financial shared services for the efficient functioning of
our business, including accounting, billing, data storage, purchasing and inventory management. In addition, we
have implemented an enterprise resource planning (“ERP”) system across certain significant operating locations to
support our operations. The operation of this ERP system requires the investment of human and financial
resources. We have incurred and expect to continue to incur expenses as we continue to enhance and develop our
ERP system. As a result of our ERP system, we may encounter difficulties in operating our business, which could
disrupt our operations, including our ability to timely ship and track customer orders, determine inventory
requirements, manage our supply chain, manage customer billing and otherwise adequately service our customers,
and lead to increased costs and other difficulties. If we experience significant disruptions resulting from our ERP
system, such events may disrupt or reduce the efficiency of our entire operation and have a material adverse effect
on our operating results and cash flows.

In fiscal 2020, we recorded impairment charges that eliminated our Animal Health segment’s goodwill, and
we may be required in the future to record a significant charge to earnings if our Dental segment’s goodwill
or other intangible assets become impaired.

Our balance sheet includes goodwill and other identifiable intangible assets. We recorded a $269.0 million non-cash
pre-tax goodwill impairment charge in our Animal Health segment as part of management’s annual goodwill and
other indefinite-lived intangible asset impairment tests using the beginning of our fiscal 2020 fourth quarter as the
valuation date. Due to the effects of the COVID-19 pandemic, we tested our goodwill for impairment again in April
2020 and recorded an additional $406.1 million non-cash pre-tax impairment charge of our Animal Health reporting
unit’s goodwill, based on management’s estimates of future cash flows, driven by reduced sales volumes, as well as
reduced EBITDA multiples of comparable companies. As of April 25, 2020, our Animal Health reporting unit had no
remaining goodwill as a result of the total goodwill impairment charges recorded in the fourth quarter of fiscal 2020
of $675.1 million. If future impairment of our Dental segment’s goodwill or other identifiable intangible assets is
determined, we may be required to record a significant charge to earnings in the period of such determination under
U.S. generally accepted accounting principles.

Item 1B. UNRESOLVED STAFF COMMENTS

None.

Item 2. PROPERTIES

We own our principal executive offices in St. Paul, Minnesota, and the majority of our distribution facilities. Leases of
other distribution and administrative facilities generally are on a long-term basis, expiring at various times, with
options to renew for additional periods. Most sales offices are leased for varying and usually shorter periods, with or
without renewal options. We believe our properties are in good operating condition and are suitable for the purposes
for which they are being used.

Patterson Logistics Services

The majority of assets we use to distribute product are owned and operated by Patterson Logistics Services, Inc.
(“PLSI”), a wholly-owned subsidiary, which operates the distribution function for the benefit of our dental and animal
health segments in the U.S. PLSI also advises on the operations of our fulfillment centers outside of the U.S., but
these properties are not owned by PLSI.

As of April 24, 2021, PLSI operated the following 13 fulfillment centers (seven primary centers) totaling 1.0 million
square feet:

•

two dental fulfillment centers (Hawaii and Texas);

four animal health fulfillment centers (Alabama, Colorado and Texas (two)); and

seven fulfillment centers that distribute dental and animal health products (California, Florida, Indiana, Iowa,
Pennsylvania, South Carolina and Washington).

Approximately 90% of the PLSI fulfillment center space is owned.

Dental

The Dental segment is headquartered in our principal executive offices, and maintains sales and administrative
offices at approximately 59 locations across 39 states in the U.S. and 10 locations in Canada, the majority of which
are leased. Operations in Canada are supported by fulfillment centers located in Quebec and Alberta. In addition,
this segment operates the Patterson Technology Center, a 100,000 square-foot facility in Illinois.

Animal Health

In addition to the locations operated by PLSI, Patterson Animal Health has approximately 100 properties located in
the U.S., Canada and the U.K., the majority of which are leased. In the U.S., these properties are in 82 locations
across 28 states, and comprise fulfillment centers, storage locations, sales and administrative offices, retail stores
and call centers. In Canada, operations are supported by two fulfillment centers located in Alberta and Ontario. The
segment’s operations in the U.K. are supported by a primary distribution facility in Stoke-on-Trent and an additional
nine depots used as secondary distribution points and 4 laboratory sites throughout the U.K. The headquarters for
this segment are located in a leased office in Colorado.

Item 3. LEGAL PROCEEDINGS

For a discussion of Legal Proceedings, see Note 16 - Litigation of the Notes to the Consolidated Financial
Statements included under Item 8.

Item 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Patterson’s common stock trades on the NASDAQ Global Select Market® under the symbol “PDCO.”

Holders

On June 16, 2021, the number of holders on record of common stock was 1,709. The transfer agent for Patterson’s
common stock is EQ Shareowner Services, 1110 Centre Pointe Curve, Suite 101, Mendota Heights, Minnesota
55120, telephone: (800) 468-9716.

Dividends

In fiscal 2021, a quarterly cash dividend of $0.26 per share was declared throughout the year. In fiscal 2021,
dividends were declared each quarter, with payment occurring in the subsequent quarter. We currently expect to
declare and pay quarterly cash dividends in the future, but any future dividends will be subject to approval by our
Board of Directors, which will depend on our earnings, capital requirements, operating results and financial
condition, as well as applicable law, regulatory constraints, industry practice and other business considerations that
our Board considers relevant. We are also subject to various financial covenants under our debt agreements
including the maintenance of leverage and interest coverage ratios. The terms of agreements governing debt that
we may incur in the future may also contain similar covenants. Accordingly, there can be no assurance that we will
declare and pay dividends in the future at the same rate or at all.

Securities Authorized for Issuance Under Equity Compensation Plans

For information relating to securities authorized for issuance under equity compensation plans, see Part III, Item 12.

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 under the stock repurchase plan during fiscal 2021.

Performance Graph

The graph below compares the cumulative total shareholder return on $100 invested at the market close on April
30, 2016, through April 24, 2021, with the cumulative return over the same time period on the same amount
invested in the S&P 500 Index and the S&P 500 Healthcare Index.

Patterson Companies, Inc.
S&P 500
S&P 500 Healthcare Index

Fiscal Year Ending

4/30/2016

4/29/2017

4/28/2018

4/27/2019

4/25/2020

4/24/2021

100.00
100.00
100.00

104.90
117.92
110.09

57.81
134.66
124.04

55.81
151.27
134.51

41.28
148.91
155.40

93.56
223.11
194.89

Item 6. SELECTED CONSOLIDATED FINANCIAL DATA

Not applicable.

DOLLARSCOMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURNPatterson Companies, Inc.S&P 500S&P 500 Healthcare Index4/30/20164/29/20174/28/20184/27/20194/25/20204/24/2021050100150200250

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

Overview

Our financial information for fiscal 2021 is summarized in this Management’s Discussion and Analysis and the
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.

We operate with a 52-53 week accounting convention with our fiscal year ending on the last Saturday in April. Fiscal
2021, 2020 and 2019 ended on April 24, 2021, April 25, 2020 and April 27, 2019, respectively, and all years
consisted of 52 weeks. Fiscal 2022 will end on April 30, 2022 and will consist of 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 and changes in product selling relationships. 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 significant 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 of fiscal 2021, as dental offices
began opening for elective procedures. In addition, we recorded increased sales of infection control products during
fiscal 2021, but also absorbed higher levels of inventory adjustments as market prices fluctuated throughout the
fiscal year. The disruptions we experienced in our production animal business as a result of the pandemic became
less significant after the first quarter of fiscal 2021.

Goodwill Impairment. In the fourth quarter of fiscal 2020, we recorded non-cash pre-tax goodwill impairment
charges totaling $675.1 million in our Animal Health segment ("Goodwill Impairment"), which were not fully tax
deductible. The decrease in the fair value of the Animal Health reporting unit below its carrying value was mainly the
result of a reduction in management’s estimates of future cash flows. Future cash flows were affected by a reduction
in future sales volume and operating margins. The sales volume estimate reflected recent sales trends we had
experienced. Future operating margins were expected to be lower based on then-current trends in our markets.
These trends were driven by customer and vendor consolidation. We experienced a further decrease in the fair
value of the Animal Health reporting unit subsequent to our annual goodwill impairment test, which was caused by
additional reductions in management’s estimates of future cash flows, driven by reduced sales volumes, as well as
reduced EBITDA multiples of comparable companies. These estimates and market multiples were negatively
affected by COVID-19. In fiscal 2020, the animal health industry experienced a reduction in sales volume as a result

of stay at home and shelter in place orders, as well as a result of meat packing plant closures. Our future cash flow
estimates for this business unit in fiscal 2020 reflected the long-term impact of COVID-19.

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
consolidated statements of cash flows, with a corresponding reduction to net cash (used in) provided by operating
activities within the consolidated statements of cash flows.

Gain on Investment. We recorded a pre-tax gain of $34.3 million related to one of our investments ("Gain on
Investment") in fiscal 2020. This gain was based on the selling price of preferred stock in this investment that is
similar to the preferred stock we own, and was adjusted for differences in liquidation preferences.

Early Repayment of Debt. In fiscal 2020, we repaid certain indebtedness totaling $373.8 million ("Early Repayment
of Debt"). As a result, we recorded a pre-tax non-cash charge of $9.0 million during fiscal 2020. This charge relates
to the January 2014 forward interest rate swap agreement and accelerated amortization of debt issuance costs.

Fiscal 2020 U.S. Attorney's Office Legal Reserve. We incurred costs and expenses of $58.3 million ("Fiscal 2020
U.S. Attorney's Office Legal Reserve") during the second quarter of fiscal 2020 related to the then-probable
settlement of litigation with the U.S. Attorney's Office for the Western District of Virginia, which were recorded within
operating expenses in the consolidated statements of operations and other comprehensive income in our Corporate
segment. The settlement amount was fully paid in fiscal 2020.

Fiscal 2020 Legal Reserve. We incurred expenses of $17.7 million ("Fiscal 2020 SourceOne Dental Legal
Reserve") during the first quarter of fiscal 2020 related to the settlement of litigation with SourceOne Dental, Inc.,
which were recorded within operating expenses in the consolidated statements of operations and other
comprehensive income in our Corporate segment. The settlement amount was fully paid in fiscal 2020.

Fiscal 2019 Legal Reserve. In September 2018, we signed an agreement to settle the litigation entitled In re Dental
Supplies Antitrust Litigation. Under the terms of the settlement, we paid $28.3 million into escrow upon preliminary
court approval. Such funds were to be released to the settlement fund administrator upon final court approval of the
settlement, which was granted at the fairness hearing held on June 24, 2019, at which time the settlement amount
became fully paid. We established a pre-tax reserve of $28.3 million in fiscal 2019 to account for the settlement of
this matter.

Results of Operations

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

Net sales
Cost of sales
Gross profit
Operating expenses
Goodwill impairment
Operating income (loss)
Other expense, net
Income (loss) before taxes
Income tax expense (benefit)
Net income (loss)
Net loss attributable to noncontrolling interests
Net income (loss) attributable to Patterson Companies, Inc.

Fiscal Year Ended

April 24, 2021

April 25, 2020

April 27, 2019

100.0 %
79.6
20.4
16.8
—
3.6
(0.2)
3.4
0.8
2.6
—
2.6 %

100.0 %
78.2
21.8
19.9
12.3
(10.4)
(0.4)
(10.8)
(0.1)
(10.7)
—
(10.7) %

100.0 %
78.6
21.4
18.9
—
2.5
(0.6)
1.9
0.4
1.5
—
1.5 %

Fiscal 2021 Compared to Fiscal 2020

Net sales. Consolidated net sales in fiscal 2021 were $5,912.1 million, an increase of 7.7% from $5,490.0 million in
fiscal 2020. Foreign exchange rate changes had a favorable impact of 0.5% on fiscal 2021 sales. Sales of certain
products previously recognized on a gross basis were recognized on a net basis during fiscal 2021, resulting in an
estimated 1.0% unfavorable impact to sales. This change in revenue recognition was driven by changes in
contractual terms with certain suppliers.

Dental segment sales increased 10.7% to $2,327.0 million in fiscal 2021 from $2,101.9 million in fiscal 2020.
Foreign exchange rate changes had a favorable impact of 0.3% on fiscal 2021 sales. Sales of consumables
increased 15.2%, sales of equipment and software increased 7.9%, and sales of value-added services and other
decreased 0.5% in fiscal 2021. While Dental segment sales were negatively affected by the COVID-19 pandemic
during fiscal 2021, we recorded increased sales of infection control products during this period compared to fiscal
2020 within consumable sales.

Animal Health segment sales increased 6.7% to $3,560.0 million in fiscal 2021 from $3,336.3 million in fiscal 2020.
Foreign exchange rate changes had a favorable impact of 0.7% on fiscal 2021 sales. Sales of certain products
previously recognized on a gross basis were recognized on a net basis during fiscal 2021, resulting in an estimated
1.7% unfavorable impact to sales. This change in revenue recognition was driven by changes in contractual terms
with certain suppliers. Sales were higher in fiscal 2021 as compared to fiscal 2020, driven by increased sales in our
companion animal business.

Gross profit. Consolidated gross profit margin decreased 140 basis points from the prior year to 20.4%. Gross
profit margin rates decreased in both the Dental and Animal Health segment. Our Dental segment rate was
negatively impacted by inventory adjustments related to infection control products, as well as a higher LIFO reserve
in fiscal 2021 as compared to fiscal 2020. The LIFO reserve expense recorded in fiscal 2021 in our Dental segment
was approximately $12.0 million. Our Animal Health segment rate was negatively impacted by lower transactional
margins as compared to fiscal 2020.

Operating expenses. Consolidated operating expenses for fiscal 2021 were $992.5 million, a 9.3% decrease from
the prior year of $1,094.5 million. We incurred lower operating expenses during fiscal 2021 primarily as a result of
lower legal fees and settlements, travel expenses and personnel costs. Lower personnel costs were driven by our
implementation of temporary salary reductions, furloughs and reduced work hours across our workforce during the
period from May 1, 2020 through July 31, 2020.

Goodwill impairment. In fiscal 2020, we recorded goodwill impairment charges totaling $675.1 million in our
Animal Health segment.

Operating income (loss). Consolidated operating income was $210.6 million in fiscal 2021, compared to an
operating loss of $572.1 million in fiscal 2020. The change in operating income (loss) from fiscal 2020 was driven by
the Goodwill Impairment, as well as lower legal fees and settlements, travel expenses and personnel costs incurred
in fiscal 2021.

Dental segment operating income was $201.2 million for fiscal 2021, an increase of $32.9 million from fiscal 2020.
The increase was primarily driven by higher net sales, as well as lower personnel costs and travel expenses, during
fiscal 2021.

Animal Health segment operating income was $88.1 million for fiscal 2021, as compared to an operating loss of
$594.7 million for fiscal 2020. The change was primarily driven by the Goodwill Impairment in fiscal 2020 and higher
net sales in fiscal 2021.

Corporate segment operating loss was $78.8 million for fiscal 2021, as compared to a loss of $145.7 million for
fiscal 2020. The change was driven primarily by lower legal fees and settlements during fiscal 2021, as well as
lower customer financing net sales.

Other income (expense), net. Net other expense was $10.7 million in fiscal 2021, compared to $18.3 million in
fiscal 2020. The difference in other income (expense) was primarily driven by the Gain on Investment recorded
during fiscal 2020, partially offset by higher interest expense incurred during fiscal 2020, which was driven by the
Early Repayment of Debt during fiscal 2020. In addition, we incurred lower losses on our interest rate swap
agreements during fiscal 2021.

Income tax expense (benefit). The effective income tax rate for fiscal 2021 was 22.4%. In fiscal 2020, the income
tax benefit was $1.0 million on a loss before taxes of $590.4 million. The Goodwill Impairment and the Fiscal 2020
U.S. Attorney's Office Legal Reserve were not fully deductible in fiscal 2020.

Net income (loss) attributable to Patterson Companies, Inc. and earnings (loss) per share. Net earnings
attributable to Patterson Companies Inc. was $156.0 million in fiscal 2021, compared to a net loss attributable to
Patterson Companies Inc. of $588.4 million in fiscal 2020. Earnings per diluted share were $1.61 in fiscal 2021,
compared to a loss per diluted share of $6.25 in fiscal 2020. Weighted average diluted shares in fiscal 2021 were
96.7 million, compared to 94.2 million in fiscal 2020. The fiscal 2021 and fiscal 2020 cash dividend declared was
$1.04 per common share.

Fiscal 2020 Compared to Fiscal 2019

See Item 7 in our 2020 Annual Report on Form 10-K filed June 24, 2020.

Liquidity and Capital Resources

Net cash used in operating activities was $730.5 million in fiscal 2021, compared to $243.5 million in fiscal 2020.
Net cash provided by operating activities was $48.2 million in fiscal 2019. Net cash used in operating activities in
fiscal 2021 was primarily due to the impact of our Receivables Securitization Program, as well as an increase in
accounts payable. Net cash used in operating activities in fiscal 2020 was primarily due to the impact of our
Receivables Securitization Program, partially offset by a reduction in working capital, which was driven mainly by an
increase in accounts payable. Net cash provided by operating activities in fiscal 2019 was primarily driven by a
reduction in working capital, partially offset by the impact of our Receivables Securitization Program.

Net cash provided by investing activities was $810.7 million in fiscal 2021, compared to $499.1 million in fiscal 2020
and $340.7 million in fiscal 2019. Collections of deferred purchase price receivables were $834.0 million, $540.9
million and $402.4 million in fiscal 2021, 2020 and 2019, respectively. Capital expenditures were $25.8 million,
$41.8 million and $60.7 million in fiscal 2021, 2020 and 2019, respectively. Capital expenditures in fiscal 2019
included a $14.9 million investment to convert leased property into owned property. We expect to use a total of
approximately $50 million for capital expenditures in fiscal 2022.

Net cash used in financing activities in fiscal 2021 was $22.6 million, driven by $75.2 million for dividend payments,
partially offset by $53.0 million attributed to draws on our revolving line of credit. Net cash used in financing
activities in fiscal 2020 was $271.2 million. Uses of cash consisted primarily of $460.8 million for the retirement of
long-term debt and $100.4 million for dividend payments. In December 2019, we entered into a $300.0 million
senior unsecured term loan facility, as described further below. Net cash used in financing activities in fiscal 2019
was $355.2 million. Uses of cash consisted primarily of $249.5 million for the retirement of long-term debt and $99.5
million for dividend payments.

In fiscal 2017, we entered into an amended credit agreement (“Amended Credit Agreement”), consisting of a $295.1
million term loan and a $750.0 million revolving line of credit. In March 2019, we permanently reduced the capacity
under the revolving line of credit to $500.0 million. Interest on borrowings was variable and was determined as a
base rate plus a spread. This spread, as well as a commitment fee on the unused portion of the facility, was based
on our leverage ratio, as defined in the Amended Credit Agreement. During the quarter ended October 26, 2019, we
repaid the remaining $81.6 million outstanding under the unsecured term loan.

In December 2019, we entered into a senior unsecured term loan facility agreement (the “Term Facility Agreement”),
consisting of a $300.0 million term loan. Interest on borrowings was variable and was determined as a base rate
plus a spread. This spread was based on our leverage ratio, as defined in the Term Facility Agreement. The

proceeds were used to repay certain existing indebtedness, pay fees and expenses incurred in connection with the
Term Facility Agreement, and finance our ongoing working capital and other general corporate purposes. The Term
Facility was set to mature no later than December 20, 2022. As of April 25, 2020, $300.0 million was outstanding
under the Term Facility at an interest rate of 1.87%.

In fiscal 2021, we entered into an amendment, restatement and consolidation of the Amended Credit Agreement
and the Term Facility Agreement 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 the Amended Credit Agreement and the Term Facility Agreement,
pay the fees and expenses incurred therewith, and finance our ongoing working capital and other general corporate
purposes.

As of April 24, 2021, $300.0 million was outstanding under the Credit Agreement term loan at an interest rate of
1.36%, and $53.0 million was outstanding under the Credit Agreement revolving credit facility at an interest rate of
1.34%.

On March 16, 2021, our Board of Directors approved a new share repurchase authorization for up to $500 million of
our company's common stock through March 16, 2024, replacing the March 2018 share repurchase authorization
for up to $500 million of common stock which had expired and under which no repurchases had been made. As of
April 24, 2021, $500 million remains available under the current repurchase authorization.

We have $143.2 million in cash and cash equivalents as of April 24, 2021, of which $86.1 million is in foreign bank
accounts. See Note 11 to the Consolidated Financial Statements for further information regarding our intention to
permanently reinvest these funds. Included in cash and cash equivalents as of April 24, 2021 is $36.8 million of
cash collected from previously sold customer financing arrangements that have not yet been settled with the third
party. See Note 4 to the Consolidated Financial Statements for further information.

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 next fiscal year.

We expect to continue to obtain liquidity from the sale of equipment finance contracts. Patterson sells a significant
portion of our finance contracts (see below) to a commercial paper funded conduit managed by a third party bank,
and as a result, commercial paper is indirectly an important source of liquidity for Patterson. Patterson is allowed to
participate in the conduit due to the quality of our finance contracts and our financial strength. Cash flows could be
impaired if our financial strength diminishes to a level that precluded us from taking part in this facility or other
similar facilities. Also, market conditions outside of our control could adversely affect the ability for us to sell the
contracts.

Customer Financing Arrangements

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
million. We generally sell our customers’ financing contracts to outside financial institutions in the normal course of
our business. We currently have two arrangements under which we sell these contracts.

First, we operate under an agreement to sell a portion of our equipment finance contracts to commercial paper
conduits with MUFG Bank, Ltd. ("MUFG") serving as the agent. We utilize PDC Funding, a consolidated, wholly
owned subsidiary, to fulfill a requirement of participating in the commercial paper conduit. We receive the proceeds
of the contracts upon sale to MUFG. The capacity under the agreement with MUFG at April 24, 2021 was $525
million.

Second, we maintain an agreement with Fifth Third Bank ("Fifth Third") whereby Fifth Third purchases customers’
financing contracts. PDC Funding II, a consolidated, wholly owned subsidiary, sells financing contracts to Fifth Third.
We receive the proceeds of the contracts upon sale to Fifth Third. The capacity under the agreement with Fifth Third
at April 24, 2021 was $100 million.

Our financing business is described in further detail in Note 4 to the Consolidated Financial Statements.

Contractual Obligations

A summary of our contractual obligations as of April 24, 2021 follows (in thousands):

Long-term debt principal
Long-term debt interest
Operating leases
Total

Payments due by year

Total

Less than
1 year

1-3 years

3-5 years

$ 591,250 $ 100,750 $ 333,000 $ 117,500 $

49,378
84,879

16,158
34,304

23,067
40,690

7,121
8,557

$ 725,507 $ 151,212 $ 396,757 $ 133,178 $

More than
5 years

40,000
3,032
1,328
44,360

As of April 24, 2021 our gross liability for uncertain tax positions, including interest and penalties, was $12.9 million.
We are not able to reasonably estimate the amount by which the liability will increase or decrease over an extended
period of time or whether a cash settlement of the liability will be required. Therefore, these amounts have been
excluded from the schedule of contractual obligations.

For a more complete description of our contractual obligations, see Notes 9 and 10 to the Consolidated Financial
Statements.

Outlook

The COVID-19 pandemic and measures taken in response thereto have had, and may continue to have, a
significant impact on our businesses. Beginning in March 2020, across our markets authorities implemented
numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter in place
orders, and business shutdowns, and continued to implement such measures as new waves of infection developed.
These measures had negative impacts on consumer spending and business spending habits, that adversely
impacted our financial results and the financial results of our customers, suppliers and business partners during
fiscal 2021, and are expected to continue to have negative impacts into fiscal 2022.

We cannot accurately estimate how long and to what extent COVID-19 will continue to impact our business.
Although we have experienced reduced demand in certain areas of our business, we are unable to predict how
significantly the pandemic will reduce future demand for services provided by dentists and veterinarians, the effect
of such decreased demand on the demand for the dental and companion animal products and services we
distribute, or the impact of the pandemic on the overall healthcare infrastructure and economic outlook in the United
States, Canada or the United Kingdom.

In addition to the impact on procedure volumes, we are experiencing and may experience other disruptions as a
result of the COVID-19 pandemic. For example, disruptions or potential disruptions include restrictions on the ability
of our personnel to travel and access customers for sales, service and other support; supplier disruptions; and
additional government requirements to “shelter at home” or other incremental mitigation efforts that may further
impact our capacity to sell and service the products we distribute. Furthermore, the economic effects of the
pandemic and other governmental actions could reduce the demand for food animal products, thereby adversely
affecting our production animal supply business. The total impact of these disruptions could have a material impact
on our financial condition, cash flows and results of operations. However, we continue to believe in the long-term
fundamentals of our business and our compelling value proposition to customers.

Working Capital Management

The following table summarizes our average accounts receivable days sales outstanding and average annual
inventory turnover for the past three fiscal years:

Days sales outstanding
Inventory turnover

Foreign Operations

Fiscal Year Ended

April 24, 2021

April 25, 2020

April 27, 2019

25.9
6.1

29.1
5.4

36.5
5.3

We derive foreign sales from Dental operations in Canada, and Animal Health operations in Canada and the U.K.
Fluctuations in currency exchange rates have not significantly impacted earnings, as these fluctuations impact
sales, cost of sales and operating expenses. However, changes in exchange rates positively impacted net sales by
$28.4 million in fiscal 2021, while they adversely affected net sales by $21.9 million and $24.3 million in fiscal 2020
and 2019, respectively. Changes in currency exchange rates are a risk accompanying foreign operations, but this
risk is not considered material with respect to our consolidated operations.

Critical Accounting Policies and Estimates

Patterson has adopted various accounting policies to prepare our consolidated financial statements in accordance
with accounting principles generally accepted in the U.S. Management believes that our policies are conservative
and our philosophy is to adopt accounting policies that minimize the risk of adverse events having a material impact
on recorded assets and liabilities. However, the preparation of financial statements requires the use of estimates
and judgments regarding the realization of assets and the settlement of liabilities based on the information available
to management at the time. Changes subsequent to the preparation of the financial statements in economic,
technological and competitive conditions may materially impact the recorded values of Patterson’s assets and
liabilities. Therefore, the users of the financial statements should read all the notes to the Consolidated Financial
Statements and be aware that conditions currently unknown to management may develop in the future. This may
require a material adjustment to a recorded asset or liability to consistently apply to our significant accounting
principles and policies that are discussed in Note 1 to the Consolidated Financial Statements. The financial
performance and condition of Patterson may also be materially impacted by transactions and events that we have
not previously experienced and for which we have not been required to establish an accounting policy or adopt a
generally accepted accounting principle.

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, 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.

Patterson has a relatively large, dispersed customer base and no single customer accounts for more than 10% of
consolidated net sales. In addition, the equipment sold to customers under finance contracts generally serves as
collateral for the contract and the customer provides a personal guarantee as well.

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

Patterson Advantage Loyalty Program – Patterson Dental provides a point-based awards program to qualifying
customers involving the issuance of “Patterson Advantage dollars” which can be used toward equipment and
technology purchases. Patterson Advantage dollars earned during a program year expire one year after the end of
the program year. The cost and corresponding liability associated with the program is recognized as contra-
revenue. As of April 24, 2021, we believe we have sufficient experience with the program to reasonably estimate the
amount of Patterson Advantage dollars that will not be redeemed and thus have recorded a liability for 89.0% of the
maximum potential amount that could be redeemed. We recognize the expected breakage amount as revenue in
proportion to the pattern of rights exercised by the customer, and we recognize the estimated value of unused
Patterson Advantage dollars as redemptions occur. Breakage recognized was immaterial to all periods presented.

Inventory and Reserves – Inventory consists primarily of merchandise held for sale and is stated at the lower of cost
or market. Cost is determined using the last-in, first-out ("LIFO") method for all inventories, except for foreign
inventories and manufactured inventories, which are valued using the first-in, first-out ("FIFO") method. We
continually assess the valuation of inventories and reduce the carrying value of those inventories that are obsolete
or in excess of forecasted usage to estimated realizable value. Estimates are made of the net realizable value of
such inventories based on analyses and assumptions including, but not limited to, historical usage, future demand
and market requirements.

Goodwill and Other Indefinite-Lived Intangible Assets – Goodwill represents the excess of cost over the fair value of
identifiable net assets of businesses acquired. Impairment testing for goodwill is done at the reporting unit level, with
all goodwill assigned to a reporting unit. We have two reporting units as of April 24, 2021; Dental and Animal Health.
Our Corporate reportable segment's assets and liabilities, and net sales and expenses, are allocated to the two
reporting units. We assess goodwill for impairment annually and whenever an event occurs or circumstances
change that would indicate that the carrying amount may be impaired. Any goodwill impairment is measured as the
amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying value of goodwill.

The determination of fair value involves uncertainties because it requires management to make assumptions and to
apply judgment to estimate industry and economic factors and the profitability of future business strategies.
Patterson conducts impairment testing based on current business strategy in light of present industry and economic
conditions, as well as future expectations. Additionally, in assessing goodwill for impairment, the reasonableness of
the implied control premium is considered based on market capitalizations and recent market transactions.

Our indefinite-lived intangible asset is a trade name, which is assessed for impairment by comparing the carrying
value of the asset with its fair value. If the carrying value exceeds fair value, an impairment loss is recognized in an
amount equal to the excess. The determination of fair value involves assumptions, including projected revenues and
gross profit levels, as well as consideration of any factors that may indicate potential impairment.

In connection with the preparation of these financial statements in the fourth quarter of fiscal 2021, management
completed its annual goodwill and other indefinite-lived intangible asset impairment tests using the beginning of our
fiscal 2021 fourth quarter as the valuation date. We determined that there was no impairment of either goodwill or
our indefinite-lived intangible asset.

In connection with the preparation of our fiscal 2020 Form 10-K in the fourth quarter of fiscal 2020, management
completed its annual goodwill and other indefinite-lived intangible asset impairment tests using the beginning of our
fiscal 2020 fourth quarter as the valuation date. We determined that there was no impairment of our indefinite-lived
intangible asset. Our annual goodwill impairment test resulted in no impairment to the Dental reporting unit’s
goodwill, and a $269.0 million non-cash pre-tax impairment charge of our Animal Health reporting unit’s goodwill.

The decrease in the fair value of the Animal Health reporting unit below its carrying value was mainly the result of a
reduction in management’s estimates of future cash flows. Future cash flows were affected by a reduction in future
sales volume and operating margins. The sales volume estimate reflected recent sales trends we had experienced.
Future operating margins were expected to be lower based on then-current trends in our markets. These trends
were driven by customer and vendor consolidation.

Subsequent to the annual test being completed and in connection with the preparation of our fiscal 2020 Form 10-K
in the fourth quarter of fiscal 2020, we experienced events and circumstances that indicated that the carrying
amount of goodwill may have been further impaired. These events and circumstances included a decline in our
projected future earnings and a sustained decrease in our share price. As such, we tested our goodwill for
impairment as of the beginning of our fiscal April 2020. This test resulted in no impairment to the Dental reporting
unit’s goodwill, and a $406.1 million non-cash pre-tax impairment charge of our Animal Health reporting unit’s
goodwill.

The decrease in the fair value of the Animal Health reporting unit subsequent to the annual goodwill impairment test
was caused by additional reductions in management’s estimates of future cash flows, driven by reduced sales
volumes, as well as reduced EBITDA multiples of comparable companies. These estimates and market multiples
were negatively affected by COVID-19. In fiscal 2020, the animal health industry experienced a reduction in sales
volume as a result of stay at home and shelter in place orders, as well as a result of meat packing plant closures.
Our future cash flow estimates for this business unit in fiscal 2020 reflected the long-term impact of COVID-19.

As of April 25, 2020, our Animal Health reporting unit had no remaining goodwill as a result of the total goodwill
impairment charges recorded in fiscal 2020 of $675.1 million.

Long-Lived Assets – Long-lived assets, including definite-lived intangible assets, are evaluated for impairment
whenever events or changes in circumstances indicate that the carrying amount of the assets may not be
recoverable through the estimated undiscounted future cash flows derived from such assets. Our definite-lived
intangible assets primarily consist of customer relationships, trade names and trademarks. When impairment exists,
the related assets are written down to fair value using level 3 inputs, as discussed further in Note 6 to the
Consolidated Financial Statements.

Development Costs of Software to be Sold - At the end of each fiscal quarter, we compare the unamortized
capitalized costs of software to be sold to its net realizable value. If the unamortized amount exceeds the net
realizable value, an impairment is recorded for this amount of that asset shall be written off. If the unamortized
capitalized costs are less than the net realizable value of that asset, then there is no impairment.

Related Party Transactions – We have interests in a number of entities that are accounted for using the equity
method. During fiscal 2021, 2020 and 2019 we made purchases of $110.2 million, $94.2 million and $87.9 million
from these entities, respectively. During fiscal 2021, 2020 and 2019, we recorded net sales of $93.6 million, $110.3
million and $74.5 million to these entities, respectively.

Income Taxes – We are subject to income taxes in the U.S. and numerous foreign jurisdictions. Significant
judgments are required in determining the consolidated provision for income taxes. Changes in interpretation of the
Tax Act could create potential added uncertainties.

During the ordinary course of business, there are many transactions and calculations for which the ultimate tax
determination is uncertain. As a result, we recognize tax liabilities based on estimates of whether additional taxes
and interest will be due. These tax liabilities are recognized when, despite our belief that our tax return position is
supportable, we believe that certain positions may not be fully sustained upon review by tax authorities. We believe
that our accruals for tax liabilities are adequate for all open audit years based on our assessment of many factors
including past experience and interpretations of tax law. This assessment relies on estimates and assumptions and
may involve a series of complex judgments about future events. To the extent that the final tax outcome of these
matters is different than the amounts recorded, such differences will impact income tax expense in the period in
which such determination is made and could materially affect our financial results.

Valuation allowances are established for deferred tax assets if, after assessment of available positive and negative
evidence, it is more likely than not that the deferred tax asset will not be fully realized.

Self-insurance – Patterson is self-insured for certain losses related to general liability, product liability, automobile,
workers’ compensation and medical claims. We estimate our liabilities based upon an analysis of historical data and
actuarial estimates. While current estimates are believed reasonable based on information currently available,
actual results could differ and affect financial results due to changes in the amount or frequency of claims, medical
cost inflation or other factors. Historically, actual results related to these types of claims have not varied significantly
from estimated amounts.

Stock-based Compensation – We recognize stock-based compensation based on certain assumptions including
inputs within valuation models, estimated forfeitures and estimated performance outcomes. These assumptions
require subjective judgment and changes in the assumptions can materially affect fair value estimates. Management
assesses the assumptions and methodologies used to estimate forfeitures and to calculate estimated fair value of
stock-based compensation on a regular basis. Circumstances may change, and additional data may become
available over time, which could result in changes to these assumptions and methodologies and thereby materially
impact the fair value determination or estimates of forfeitures. If factors change and we employ different
assumptions, the amount of compensation expense associated with stock-based compensation may differ
significantly from what was recorded in the current period.

Subsequent Events

During the first quarter of fiscal 2022, we entered into an agreement to sell a portion of one of our investments,
which we expect to close in the first quarter of fiscal 2022. We expect to receive cash proceeds of approximately
$54.0 million, and to record a pre-tax gain of approximately $28.0 million in other income, net in our consolidated
statements of operations and other comprehensive income (loss) as a result of this transaction. Also related to this
transaction, we expect to record a non-cash gain in the first quarter of fiscal 2022 related to the remaining portion of
this investment.

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk

We are exposed to market risk consisting of foreign currency rate fluctuations and changes in interest rates.

We are exposed to foreign currency exchange rate fluctuations in our operating statement due to transactions
denominated primarily in Canadian Dollars and British Pounds. Although we do not currently have foreign currency
hedge contracts, we continually evaluate our foreign currency exchange rate risk and the different mechanisms for
use in managing such risk. A hypothetical 10% change in the value of the U.S. dollar in relation to our most
significant foreign currency exposures would have changed net sales by approximately $94.1 million for the fiscal
year ended April 24, 2021. This amount is not indicative of the hypothetical net earnings impact due to the partially
offsetting impact of the currency exchange movements on cost of sales and operating expenses. We estimate that if
foreign currency exchange rates changed by 10%, the impact would have been approximately $3.0 million to
income (loss) before taxes for the fiscal year ended April 24, 2021.

The Credit Agreement consists of a $300.0 million term loan facility and a $700.0 million revolving credit facility,
which will mature no later than February 2024. Interest on borrowings is variable and is determined as a base rate
plus a spread. This spread, as well as a commitment fee on the unused portion of the facility, is based on our
leverage ratio, as defined in the Credit Agreement. Due to the interest rate being variable, fluctuations in interest
rates may impact our earnings. Based on our current level of debt, we estimate that a 100 basis point change in
interest rates would have a $3.5 million annual impact on our income (loss) before taxes.

Our earnings are also affected by fluctuations in short-term interest rates through the investment of cash balances
and the practice of selling fixed rate equipment finance contracts under agreements with both a commercial paper
conduit and a bank that provide for pricing based on variable interest rates.

When considering the exposure under the agreements whereby we sell equipment finance contracts to both a
commercial paper conduit and bank, we have the ability to select pricing based on interest rates ranging from 30
day LIBOR up to twelve month LIBOR. In addition, the majority of the portfolio of installment contracts generally
turns over in less than 48 months, and we can adjust the rate we charge on new customer contracts at any time.
Therefore, in times where the interest rate markets are not rapidly increasing or decreasing, the average interest
rate in the portfolio generally moves with the interest rate markets and thus would parallel the underlying interest
rate movement of the pricing built into the sale agreements. In calculating the gain on the contract sales, we use an
interest rate curve that approximates the maturity period of the then-outstanding contracts. If increases in the
interest rate markets occur, the average interest rate in our contract portfolio may not increase at the same rate,
resulting in a reduction of gain on the contract sales as compared to the gain that would be realized if the average
interest rate in our portfolio were to increase at a more similar rate to the interest rate markets. In fiscal 2019, we
entered into forward interest rate swap agreements in order to hedge against interest rate fluctuations that impact
the amount of net sales we record related to these 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 as income or expense during the period in which the change occurs. As a result of entering into these
interest rate swap agreements, we estimate that a 10% change in interest rates would have less than a $1.0 million
annual impact on our income (loss) before taxes.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of Patterson Companies, Inc.

Opinion on Internal Control Over Financial Reporting

We have audited Patterson Companies, Inc. internal control over financial reporting as of April 24, 2021, based on
criteria established
the Committee of Sponsoring
Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Patterson
Companies, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting
as of April 24, 2021, based on the COSO criteria.

Internal Control—Integrated Framework

issued by

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the accompanying consolidated balance sheets of Patterson Companies, Inc. (the Company) as
of April 24, 2021 and April 25, 2020, the related consolidated statements of operations and other comprehensive
income (loss), changes in stockholders' equity and cash flows for each of the three years in the period ended April
24, 2021, and the related notes and the financial statement schedule listed in the Index at Item 15(a)(2) (collectively
referred to as the “consolidated financial statements”) and our report dated June 23, 2021 expressed an unqualified
opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for
its assessment of the effectiveness of internal control over financial reporting included in the accompanying
Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an
opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting
firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with
the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting
was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.

/s/ Ernst & Young LLP
Minneapolis, Minnesota
June 23, 2021

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of Patterson Companies, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Patterson Companies, Inc. (the Company) as of
April 24, 2021 and April 25, 2020, the related consolidated statements of operations and other comprehensive
income (loss), changes in stockholders' equity and cash flows for each of the three years in the period ended April
24, 2021, and the related notes and the financial statement schedule listed in the Index at Item 15(a)(2) (collectively
referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present
fairly, in all material respects, the financial position of the Company at April 24, 2021 and April 25, 2020, and the
results of its operations and its cash flows for each of the three years in the period ended April 24, 2021, in
conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company's internal control over financial reporting as of April 24, 2021, based on criteria
established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 framework), and our report dated June 23, 2021 expressed an unqualified opinion
thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an
opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated
financial statements that was communicated or required to be communicated to the audit committee and that: (1)
relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our
especially challenging, subjective or complex judgments. The communication of the critical audit matter does not
alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by
communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the
account or disclosure to which it relates.

Capitalized development costs of software to be sold impairment

Description of the
Matter

At April 24, 2021, the Company’s capitalized development costs of software to be sold was
$68.2 million. As discussed in Note 1 of the consolidated financial statements, at the end of
each fiscal quarter these unamortized capitalized costs of software to be sold are
compared to its net realizable value. If the unamortized capitalized costs are less than the
net realizable value of that asset, then there is no impairment.

Auditing management’s comparison of unamortized capitalized development costs of
software to be sold to its net realizable value was complex and highly judgmental due to
the significant estimation required in determining the net realizable value of the asset. For
software to be sold, the estimate of the net realizable value was sensitive to significant
assumptions, such as forecasted revenue and related revenue growth rates, gross margin
and operating expenses as a percentage of revenue assumptions, which are affected by
expected future market or economic conditions.

How We Addressed
the Matter in Our
Audit

We obtained an understanding, evaluated
the operating
effectiveness of controls over the Company’s process to compare unamortized capitalized
costs of software to be sold to its net realizable value, including controls over
management’s budgeting and forecasting process used to develop the projected future
revenue, gross margins and operating expenses used in the fair value estimates, as well
as controls over management’s review of the significant data and assumptions described
above.

the design and

tested

To test the estimated fair value of the unamortized capitalized development costs of
software to be sold, we performed audit procedures that included, among others,
assessing the valuation methodologies used by management and testing the significant
assumptions discussed above. We compared the significant assumptions used by
management to current industry, market and economic trends, as well as other relevant
factors. We assessed the reasonableness of forecasted future revenue by comparing the
forecasts to historical software sales results. We also performed sensitivity analyses of
significant assumptions to evaluate the significance of changes in the recoverability that
would result from changes in assumptions.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 1985.

Minneapolis, Minnesota
June 23, 2021

PATTERSON COMPANIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)

ASSETS

Current assets:

Cash and cash equivalents

Receivables, net of allowance for doubtful accounts of $6,138 and $5,123

Inventory

Prepaid expenses and other current assets

Total current assets

Property and equipment, net

Operating lease right-of-use assets, net

Long-term receivables, net

Goodwill, net

Identifiable intangibles, net

Other non-current assets

Total assets

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

Accrued payroll expense

Other accrued liabilities

Operating lease liabilities

Current maturities of long-term debt

Borrowings on revolving credit

Total current liabilities

Long-term debt

Non-current operating lease liabilities

Deferred income taxes

Other non-current liabilities

Total liabilities

Stockholders’ equity:

Common stock, $0.01 par value: 600,000 shares authorized; 96,813 and 95,947
shares issued and outstanding
Additional paid-in capital

Accumulated other comprehensive loss

Retained earnings

Unearned ESOP shares

Total Patterson Companies, Inc. stockholders' equity

Noncontrolling interests

Total stockholders’ equity

Total liabilities and stockholders’ equity

See accompanying notes

April 24, 2021

April 25, 2020

143,244 $

77,944

449,235

736,778

286,672

416,523

812,194

236,104

1,615,929

1,542,765

219,438

77,217

223,970

139,932

279,644

195,381

303,725

79,021

214,915

138,724

313,505

122,695

$ 2,751,511 $ 2,715,350

609,264 $

862,093

118,425

175,975

32,252

100,750

53,000

68,385

113,714

30,706

—

1,089,666

1,074,898

487,545

48,318

124,491

36,820

587,766

49,854

134,547

31,841

1,786,840

1,878,906

968

959

169,099

146,606

(62,592)

(97,039)

855,741

—

963,216

1,455

799,652

(16,061)

834,117

2,327

964,671

836,444

$ 2,751,511 $ 2,715,350

PATTERSON COMPANIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND OTHER COMPREHENSIVE INCOME (LOSS)
(In thousands, except per share amounts)

Net sales

Cost of sales

Gross profit

Operating expenses

Goodwill impairment

Operating income (loss)

Other (expense) income:

Other income, net

Interest expense

Income (loss) before taxes

Income tax expense (benefit)

Net income (loss)

Net loss attributable to noncontrolling interests

Fiscal Year Ended

April 24, 2021

April 25, 2020

April 27, 2019

$ 5,912,066 $ 5,490,011 $ 5,574,523

4,708,936

4,292,601

4,383,748

1,203,130

1,197,410

1,190,775

992,523

1,094,474

1,053,059

—

675,055

—

210,607

(572,119)

137,716

13,608

23,499

8,178

(24,284)

(41,787)

(39,666)

199,931

44,822

155,109

(590,407)

106,228

(1,040)

(589,367)

23,352

82,876

(872)

(921)

(752)

Net income (loss) attributable to Patterson Companies, Inc.

155,981 $

(588,446) $

83,628

Earnings (loss) per share attributable to Patterson Companies, Inc.:

Basic

Diluted

Weighted average shares:

Basic

Diluted

Dividends declared per common share

Comprehensive income (loss)

Net income (loss)

Foreign currency translation gain (loss)

Cash flow hedges, net of tax

Comprehensive income (loss)

1.63 $

1.61 $

(6.25) $

0.90

0.89

95,599

96,664

94,154

1.04 $

92,755

93,484

1.04

155,109 $

(589,367) $

82,876

33,405

1,042

(14,062)

(15,583)

7,999

2,288

189,556 $

(595,430) $

69,581

See accompanying notes

PATTERSON COMPANIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(In thousands)

Common Stock

Number

Amount

Additional
Paid-in
Capital

Accumulated
Other
Comprehensive
Loss

Retained
Earnings

Unearned
ESOP
Shares

Non-
controlling
interests

Total

Balance at April 28, 2018

94,756 $

948 $ 103,776 $

(74,974) $ 1,497,766 $

(65,726) $

— $ 1,461,790

Foreign currency translation

Cash flow hedges

Net income (loss)

Dividends declared

Common stock issued and
related tax benefits

Stock based compensation

ESOP activity

Increase from asset
acquisition

—

516

—

7,999

19,685

—

(15,583)

2,288

—

83,628

(97,898)

—

15,345

—

(752)

—

(15,583)

2,288

82,876

(97,898)

8,004

19,685

15,345

—

4,000

Balance at April 27, 2019

95,272

953

131,460

(88,269)

1,483,496

(50,381)

3,248

1,480,507

Foreign currency translation

Cash flow hedges

Net loss

Dividends declared

Common stock issued and
related tax benefits

Stock based compensation

ESOP activity

Adoption of ASU 2016-02

Adoption of ASU 2018-02

Balance at April 25, 2020

Foreign currency translation

Cash flow hedges

Net income (loss)

Dividends declared

Common stock issued and
related tax benefits

Stock based compensation

ESOP activity

Balance at April 24, 2021

—

675

—

(7,790)

22,936

—

(14,062)

7,999

—

(2,707)

—

(588,446)

(99,552)

—

1,447

2,707

—

34,320

—

(14,062)

7,999

(921)

(589,367)

—

(99,552)

(7,784)

22,936

34,320

1,447

—

95,947

959

146,606

(97,039)

799,652

(16,061)

2,327

836,444

—

866

—

1,270

21,223

—

33,405

1,042

—

155,981

(99,892)

—

16,061

—

33,405

1,042

(872)

155,109

—

(99,892)

1,279

21,223

16,061

96,813 $

968 $ 169,099 $

(62,592) $

855,741 $

— $

1,455 $

964,671

See accompanying notes

PATTERSON COMPANIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

Operating activities:
Net income (loss)
Adjustments to reconcile net income (loss) to net cash (used in)
provided by operating activities:

Depreciation
Amortization
Investment gain
Goodwill impairment
Bad debt expense
Non-cash employee compensation
Accelerated amortization of debt issuance costs on early
retirement of debt
Deferred income taxes
Non-cash losses (gains) and other, net
Change in assets and liabilities:

Receivables
Inventory
Accounts payable
Accrued liabilities
Long term receivables
Other changes from operating activities, net
Net cash (used in) provided by operating activities

Investing activities:

Additions to property and equipment
Collection of deferred purchase price receivables
Other investing activities
Net cash provided by investing activities

Financing activities:
Dividends paid
Proceeds from issuance of long-term debt
Debt issuance costs
Payments on long-term debt
Draw on (payments on) revolving credit
Other financing activities
Net cash used in financing activities
Effect of exchange rate changes on cash
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period

Supplemental disclosures:

Income taxes paid
Interest paid

Fiscal Year Ended

April 24, 2021

April 25, 2020

April 27, 2019

155,109 $

(589,367) $

82,876

41,669
37,227
—
—
2,559
30,488

—

(10,760)
1,318

(916,694)
91,193
(268,338)
85,849
(5,801)
25,662
(730,519)

44,981
37,201
(34,334)
675,055
2,008
37,354

8,984
(31,800)

—

(540,065)
(59,258)
219,613
25,474
(7,156)
(32,234)
(243,544)

(25,788)
833,958
2,493
810,663

(41,809)
540,944
—
499,135

(75,183)

—
—
—
53,000

(462)
(22,645)
7,801
65,300
77,944

143,244 $

(100,442)
300,000

(3,300)
(460,840)

—
(6,647)
(271,229)
(2,064)
(17,702)
95,646
77,944 $

44,371
38,402
—
—
7,333
33,425

—
10,762
—

(205,715)
11,547
44,189
512
(4,373)
(15,171)
48,158

(60,734)
402,367
(906)
340,727

(99,468)
—
—
(249,542)
(16,000)
9,764
(355,246)
(977)
32,662
62,984
95,646

48,924 $
15,234

12,021 $
25,742

17,530
31,045

Supplemental disclosure of non-cash investing activity:

Retained interest in securitization transactions

900,578 $

707,395 $

430,858

See accompanying notes

PATTERSON COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 24, 2021
(Dollars, except per share amounts, and shares in thousands)

1. Summary of Significant Accounting Policies

Description of Business

Patterson Companies, Inc. (referred to herein as “Patterson” or in the first person notations “we,” “our,” and “us”) is a
value-added specialty distributor serving the U.S. and Canadian dental supply and the U.S., Canadian and U.K.
animal health supply markets. Patterson has three reportable segments: Dental, Animal Health and Corporate.

Basis of Presentation

The 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 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 consolidated financial
statements also include the assets and liabilities of Technology Partner Innovations, LLC, which is further described
in Note 12.

Fiscal Year End

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash equivalents consist primarily of investments in money market funds and government securities. The maturity
of these securities at the time of purchase is 90 days or less. All cash and cash equivalents are classified as
available-for-sale and carried at fair value, which approximates cost.

Inventory

Inventory consists of merchandise held for sale and is stated at the lower of cost or market. The cost of our
inventory includes the amount we pay to our suppliers to acquire inventory and freight costs incurred in connection
with the delivery of product to our distribution centers and our other locations. Cost is determined using the last-in,
first-out ("LIFO") method for all inventories, except for foreign inventories, which are valued using the first-in, first-
out ("FIFO") method. Inventories valued at LIFO represented 83% and 83% of total inventories at April 24, 2021 and
April 25, 2020, respectively.

The accumulated LIFO reserve was $120,775 at April 24, 2021 and $99,726 at April 25, 2020. We believe that
inventory replacement cost exceeds the inventory balance by an amount approximating the LIFO reserve.

Property and Equipment

Property and equipment are stated at cost. Depreciation is calculated on the straight-line method over estimated
useful lives of up to 39 years for buildings or the expected remaining life of purchased buildings, the term of the
lease for leasehold improvements, 3 to 10 years for computer hardware and software, and 5 to 10 years for furniture
and equipment.

Goodwill and Other Indefinite-Lived Intangible Assets

Goodwill represents the excess of cost over the fair value of identifiable net assets of businesses acquired.
Impairment testing for goodwill is done at the reporting unit level, with all goodwill assigned to a reporting unit. We
have two reporting units as of April 24, 2021; Dental and Animal Health. Our Corporate reportable segment's assets
and liabilities, and net sales and expenses, are allocated to the two reporting units. We assess goodwill for
impairment annually and whenever an event occurs or circumstances change that would indicate that the carrying
amount may be impaired. Any goodwill impairment is measured as the amount by which a reporting unit’s carrying
value exceeds its fair value, not to exceed the carrying value of goodwill.

In connection with the preparation of our fiscal 2020 Form 10-K in the fourth quarter of fiscal 2020, management
completed its annual goodwill and other indefinite-lived intangible asset impairment tests using the beginning of our
fiscal 2020 fourth quarter as the valuation date. We determined that there was no impairment of our indefinite-lived
intangible asset. Our annual goodwill impairment test resulted in no impairment to the Dental reporting unit’s
goodwill, and a $269,000 non-cash pre-tax impairment charge of our Animal Health reporting unit’s goodwill.

The decrease in the fair value of the Animal Health reporting unit below its carrying value was mainly the result of a
reduction in management’s estimates of future cash flows. Future cash flows were affected by a reduction in future
sales volume and operating margins. The sales volume estimate reflected recent sales trends we had experienced.
Future operating margins are expected to be lower based on then-current trends in our markets. These trends were
driven by customer and vendor consolidation.

Subsequent to the annual test being completed and in connection with the preparation of our fiscal 2020 Form 10-K
in the fourth quarter of fiscal 2020, we experienced events and circumstances that indicated that the carrying
amount of goodwill may have been further impaired. These events and circumstances included a decline in our
projected future earnings and a sustained decrease in our share price. As such, we tested our goodwill for
impairment as of the beginning of our fiscal April 2020. This test resulted in no impairment to the Dental reporting
unit’s goodwill, and a $406,055 non-cash pre-tax impairment charge of our Animal Health reporting unit’s goodwill.

As of April 25, 2020, our Animal Health reporting unit had no remaining goodwill as a result of the total goodwill
impairment charges recorded in fiscal 2020 of $675,055.

Long-Lived Assets

Long-lived assets, including definite-lived intangible assets, are evaluated for impairment whenever events or
changes in circumstances indicate that the carrying amount of the assets may not be recoverable through the
estimated undiscounted future cash flows derived from such assets. Our definite-lived intangible assets primarily
consist of customer relationships, trade names and trademarks. When impairment exists, the related assets are
written down to fair value using level 3 inputs, as discussed further in Note 6.

Other Non-current Assets

Investments

Development costs of software to be sold

Other

Other non-current assets

April 24, 2021

April 25, 2020

105,522 $

68,156

21,703

195,381 $

102,715

—

19,980

122,695

During fiscal 2021, we recorded $2,346 of amortization expense related to the development costs of software to be
sold in cost of sales within the consolidated statements of operations and other comprehensive income (loss) .

Development Costs of Software to be Sold

At the end of each fiscal quarter, we compare the unamortized capitalized costs of software to be sold to its net
realizable value. If the unamortized amount exceeds the net realizable value, an impairment is recorded for this
amount of that asset shall be written off. If the unamortized capitalized costs are less than the net realizable value of
that asset, then there is no impairment.

Financial Instruments

We account for derivative financial instruments under the provisions of Accounting Standards Codification ("ASC")
Topic 815, “Derivatives and Hedging.” Our use of derivative financial instruments is generally limited to managing
well-defined interest rate risks. We do not use financial instruments or derivatives for any trading purposes.

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.

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 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 April 24, 2021 and April 25, 2020 were $2,491 and $1,586, 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 April 24,
2021 and April 25, 2020, contract liabilities of $23,526 and $21,205 were reported in other accrued liabilities,
respectively. During the fiscal year ended April 24, 2021, we recognized $18,302 of the amount previously deferred
at April 25, 2020.

Patterson Advantage Loyalty Program

The Dental segment provides a point-based awards program to qualifying customers involving the issuance of
“Patterson Advantage dollars” which can be used toward equipment and technology purchases. Patterson
Advantage dollars earned during a program year expire one year after the end of the program year. The cost and
corresponding liability associated with the program are recognized as contra-revenue. As of April 24, 2021, we
believe we have sufficient experience with the program to reasonably estimate the amount of Patterson Advantage
dollars that will not be redeemed and thus have recorded a liability for 89.0% of the maximum potential amount that
could be redeemed. We recognize the expected breakage amount as revenue in proportion to the pattern of rights
exercised by the customer, and we recognize the estimated value of unused Patterson Advantage dollars as
redemptions occur. Breakage recognized was immaterial to all periods presented.

Freight and Delivery Charges

Freight and delivery charges are included in cost of sales in the consolidated statements of operations and other
comprehensive income (loss).

Advertising

We expense all advertising and promotional costs as incurred, except for direct marketing expenses, which are
expensed over the shorter of the life of the asset or one year. Total net advertising and promotional expenses were
$134, $5,793 and $8,356 for fiscal 2021, 2020 and 2019, respectively. There were no deferred direct-marketing
expenses included in the consolidated balance sheets as of April 24, 2021 and April 25, 2020.

Related Party Transactions

We have interests in a number of entities that are accounted for using the equity method. During fiscal 2021, 2020
and 2019, we made purchases of $110,210, $94,238 and $87,944 from these entities, respectively. During fiscal
2021, 2020 and 2019, we recorded net sales of $93,577, $110,262 and $74,489 to these entities, respectively.

Income Taxes

The liability method is used to account for income tax expense. Under this method, deferred tax assets and
liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and
are measured using the enacted tax rates and laws that will be in effect when the differences are expected to
reverse.

Employee Stock Ownership Plan ("ESOP")

Compensation expense related to our defined contribution ESOP is computed based on the shares allocated
method.

Self-insurance

Patterson is self-insured for certain losses related to general liability, product liability, automobile, workers’
compensation and medical claims. We estimate our liabilities based upon an analysis of historical data and actuarial
estimates. While current estimates are believed reasonable based on information currently available, actual results
could differ and affect financial results due to changes in the amount or frequency of claims, medical cost inflation or
other factors. Historically, actual results related to these types of claims have not varied significantly from estimated
amounts.

Stock-based Compensation

We recognize stock-based compensation expense based on estimated grant date fair values. The grant date fair
value of stock options and stock purchases made through our Employee Stock Purchase Plan and our Capital
Accumulation Plan are estimated using the Black-Scholes option pricing valuation model. The grant date fair value
of performance stock units that vest upon meeting certain market conditions is estimated using the Monte Carlo
valuation model. These valuations require estimates to be made including expected stock price volatility which
considers historical volatility trends, implied future volatility based on certain traded options and other factors. We
estimate the expected life of awards based on several factors, including types of participants, vesting schedules,
contractual terms and various factors surrounding exercise behavior of different groups.

The grant date fair value of time-based restricted stock awards and restricted stock units is calculated based on the
closing price of our common stock on the date of grant.

Compensation expense for all share-based payment awards is recognized over the requisite service period (or to
the date a participant becomes eligible for retirement, if earlier) for awards that are expected to vest.

Other Income, Net

Gain on investment

Gain (loss) on interest rate swap agreements

Investment income and other

Other income, net

Comprehensive Income (Loss)

Fiscal Year Ended

April 24, 2021

April 25, 2020

April 27, 2019

— $

34,334 $

1,151

12,457

(18,712)

7,877

13,608 $

23,499 $

4,477

(2,903)

6,604

8,178

Comprehensive income (loss) is computed as net income (loss) plus certain other items that are recorded directly to
stockholders’ equity. Significant items included in comprehensive income (loss) 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 hedge losses was $321, $2,460 and $620
for fiscal 2021, 2020 and 2019, respectively.

Earnings (Loss) Per Share ("EPS")

The amount of basic EPS is computed by dividing net income (loss) attributable to Patterson Companies, Inc. by the
weighted average number of outstanding common shares during the period. The amount of diluted EPS is
computed by dividing net income (loss) by the weighted average number of outstanding common shares and
common share equivalents, when dilutive, during the period.

The following table sets forth the denominator for the computation of basic and diluted EPS. There were no material
adjustments to the numerator.

Fiscal Year Ended

April 24, 2021

April 25, 2020

April 27, 2019

Denominator for basic EPS – weighted average shares

95,599

94,154

92,755

Effect of dilutive securities – stock options, restricted stock and stock
purchase plans
Denominator for diluted EPS – weighted average shares

1,065

96,664

—

94,154

729

93,484

Potentially dilutive securities representing 1,014, 2,517 and 1,792 shares for fiscal 2021, 2020 and 2019,
respectively, were excluded from the calculation of diluted EPS because their effects were anti-dilutive using the
treasury stock method.

For the fiscal year ended April 25, 2020, 905 incremental shares related to dilutive securities were not included in
the diluted EPS calculation because we reported a loss for this period. Shares related to dilutive securities have an
anti-dilutive impact on EPS when a net loss is reported and therefore are not included in the calculation.

Recent Accounting Pronouncements

In March 2020, 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 ASU No. 2021-01, “Reference Rate Reform (Topic 848): Scope”. 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
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.

In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740)". This ASU will simplify the
accounting for income taxes by removing certain exceptions to the general principles in Topic 740, as well as
improve consistent application of, and simplify U.S. GAAP for other areas of Topic 740. We will adopt the new
guidance in the first quarter of fiscal 2022, but do not anticipate any material changes to our consolidated balance
sheet or consolidated statement of operations and other comprehensive income (loss).

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments-Credit Losses (Topic 326),” which requires
the measurement of all expected credit losses for financial assets held at the reporting date based on historical
experience, current conditions, and reasonable and supportable forecasts. We adopted the new guidance in the first
quarter of fiscal 2021, and it did not have a material effect on our consolidated balance sheet or consolidated
statement of operations and other comprehensive income (loss).

2. Cash and Cash Equivalents

Cash and cash equivalents consisted of the following:

Cash on hand

Money market funds

Total

April 24, 2021

April 25, 2020

141,546 $

74,553

1,698

3,391

143,244 $

77,944

Cash on hand is generally in interest earning accounts. Included in cash and cash equivalents in the consolidated
balance sheets are $36,771 and $21,830 as of April 24, 2021 and April 25, 2020, respectively, which represent cash
collected from previously sold customer financing contracts that have not yet been settled. See Note 4 for additional
information.

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 April 24, 2021, 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 April 24, 2021 and April 25, 2020, the
fair value of outstanding trade receivables transferred to the Purchasers under the facility and derecognized from
the consolidated balance sheets were $384,950 and $305,020, respectively. Sales of trade receivables under this
facility were $3,171,456, $2,068,409, and $1,667,449, and cash collections from customers on receivables sold
were $3,094,060, $2,128,394 and $1,445,926 during the fiscal years ended 2021, 2020 and 2019, respectively.

The DPP receivable is recorded at fair value within the 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 consolidated
statements of operations and other comprehensive income (loss), we recorded a loss of $3,338, $7,242 and $7,622
during fiscal 2021, 2020 and 2019, respectively, related to the Receivables.

The following summarizes the activity related to the DPP receivable:

Beginning DPP receivable balance

Non-cash additions to DPP receivable

Cash collections on DPP receivable

Ending DPP receivable balance

4. Customer Financing

Fiscal Year Ended

April 24, 2021

April 25, 2020

April 27, 2019

117,327 $

768,619

(701,947)

183,999 $

57,238 $

552,751

(492,662)

117,327 $

—

408,565

(351,327)

57,238

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% 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 April 24, 2021 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 April 24, 2021 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 consolidated statements of operations and
other comprehensive income (loss). Expenses incurred related to customer financing activities are recorded in
operating expenses in our consolidated statements of operations and other comprehensive income (loss).

During fiscal 2021, 2020 and 2019, we sold $369,497, $357,616 and $279,204 of contracts under these
arrangements, respectively. In net sales in the consolidated statements of operations and other comprehensive
income (loss), we recorded a loss of $2,048 during fiscal 2021, and a gain of $43,919 and $16,883 during fiscal
2020 and 2019, respectively, related to these contracts sold. Cash collections on financed receivables sold were
$401,535, $346,077 and $369,588 during the fiscal years ended 2021, 2020 and 2019, respectively.

Included in cash and cash equivalents in the consolidated balance sheets are $36,771 and $21,830 as of April 24,
2021 and April 25, 2020, respectively, which represent cash collected from previously sold customer financing
contracts that have not yet been settled. Included in current receivables in the consolidated balance sheets are
$50,638 and $21,391 as of April 24, 2021 and April 25, 2020, respectively, of finance contracts we have not yet sold.
A total of $646,503 of finance contracts receivable sold under the arrangements was outstanding at April 24, 2021.
Since the internal financing program began in 1994, bad debt write-offs have amounted to less than 1% of the loans
originated.

The following summarizes the activity related to the DPP receivable:

Beginning DPP receivable balance

Non-cash additions to DPP receivable

Cash collections on DPP receivable

Ending DPP receivable balance

Fiscal Year Ended

April 24, 2021

April 25, 2020

April 27, 2019

228,019 $

121,657 $

150,404

131,959

154,644

(132,011)

(48,282)

22,293

(51,040)

227,967 $

228,019 $

121,657

The arrangements require us to maintain a minimum current ratio and maximum leverage ratio. We were in
compliance with those covenants at April 24, 2021.

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 April 24, 2021, 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. We sold an identical interest rate cap to the same bank. As of
April 24, 2021, PDC Funding II had purchased an interest rate cap from a bank with a notional amount of $100,000
and a maturity date of November 2027. 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. In fiscal 2020, we repaid certain indebtedness, resulting in
accelerating a portion of this interest expense and recording a pre-tax non-cash charge of $8,134. See Note 10 for
additional information.

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 25, 2020, the remaining notional amount for interest rate swap agreements was $634,029, with the latest
maturity date in fiscal 2027. During fiscal 2021, we entered into forward interest rate swap agreements with a
notional amount of $281,778. As of April 24, 2021, the remaining notional amount for interest rate swap agreements
was $653,122, with the latest maturity date in fiscal 2028.

Net cash payments of $9,373 and $1,881 were made in fiscal 2021 and 2020, respectively, to settle a portion of our
liabilities related to these interest rate swap agreements. These payments are reflected as cash outflows in the
consolidated statements of cash flows within net cash (used in) provided by operating activities.

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

Derivative type
Assets:

Interest rate contracts

Liabilities:

Interest rate contracts
Interest rate contracts

Total liability derivatives

Classification

April 24, 2021

April 25, 2020

Other non-current assets

2,120 $

204

Other accrued liabilities
Other non-current liabilities

3,776
7,795

11,571 $

6,789
13,060
19,849

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

Derivatives in cash flow hedging relationships
Interest rate contracts

Statements of operations
Interest expense

April 24, 2021

April 25, 2020

April 27, 2019

(1,363) $

(10,458) $

(2,908)

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

Fiscal Year Ended

Amount of Gain (Loss) Recognized in Income on
Derivatives

Fiscal Year Ended

Derivatives not designated as hedging instruments Statements of operations
Interest rate contracts

Other income, net

April 24, 2021

April 25, 2020

April 27, 2019

1,151 $

(18,712) $

(2,903)

There were no gains or losses recognized in other comprehensive income (loss) on cash flow hedging derivatives in
fiscal 2021, 2020 or 2019.

We recorded no ineffectiveness during fiscal 2021, 2020 or 2019. As of April 24, 2021, 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.

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.

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:

Assets:

Cash equivalents

DPP receivable - receivables securitization
program
DPP receivable - customer financing

Derivative instruments

Total assets

Liabilities:

April 24, 2021

Total

Level 1

Level 2

Level 3

1,698 $

— $

—

183,999

227,967

2,120

—

2,120

183,999

227,967

—

415,784 $

1,698 $

2,120 $

411,966

Derivative instruments

11,571 $

— $

11,571 $

—

Assets:

Cash equivalents

DPP receivable - receivables securitization
program
DPP receivable - customer financing

Derivative instruments

Total assets

Liabilities:

April 25, 2020

Total

Level 1

Level 2

Level 3

3,391 $

— $

—

117,327

228,019

204

—

204

117,327

228,019

—

348,941 $

3,391 $

204 $

345,346

Derivative instruments

19,849 $

— $

19,849 $

—

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 fiscal year ended April 25, 2020, we recorded a pre-tax gain of $34,334 related to one of our investments
in other income, net in our consolidated statements of operations and other comprehensive income (loss). This gain
was based on the selling price of preferred stock in this investment that is similar to the preferred stock we own, and
was adjusted for differences in liquidation preferences. As of April 24, 2021 and April 25, 2020, this investment had
a carrying value of $51,628 and $51,628, respectively. There were no fair value adjustments to such assets during
the fiscal years ended April 24, 2021 or April 27, 2019.

Our debt is not measured at fair value in the consolidated balance sheets. The estimated fair value of our debt as of
April 24, 2021 and April 25, 2020 was $610,811 and $601,856, respectively, as compared to a carrying value of
$588,295 and $587,766 at April 24, 2021 and April 25, 2020, 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 April 24, 2021 and April 25, 2020.

7. Goodwill and Other Intangible Assets

The changes in the carrying value of goodwill for each of our reportable segments for the fiscal year ended April 24,
2021 were as follows:

Dental
Animal Health

Corporate
Total

Balance at
April 25, 2020
$ 138,724 $

Other Activity

Balance at
April 24, 2021
1,208 $ 139,932

—
—

$ 138,724 $

—
—

—
—
1,208 $ 139,932

Other activity consists of the impact from foreign currency translation.

Balances of other intangible assets, excluding goodwill, were as follows:

April 24, 2021

Accumulated
Amortization

Gross

Net

Gross

April 25, 2020

Accumulated
Amortization

Net

Unamortized - indefinite lived:

Trade name

$ 12,300 $

— $ 12,300 $ 12,300 $

— $ 12,300

Amortized - definite lived:

159,376
85,221

196,309
48,613

352,469
132,841

135,745
72,681

216,724
60,160

355,685
Customer relationships
Trade names and trademarks 133,834
Developed technology and
other

24,321
301,205
Total amortized intangible assets
Total identifiable intangible assets $ 574,217 $ 294,573 $ 279,644 $ 568,128 $ 254,623 $ 313,505

22,422
267,344

49,976
294,573

46,197
254,623

70,518
555,828

72,398
561,917

With respect to the amortized intangible assets, future amortization expense is expected to approximate $37,303,
$36,928, $36,270, $35,708 and $25,889 for fiscal 2022, 2023, 2024, 2025 and 2026, respectively. Actual amounts
of amortization expense may differ from estimated amounts due to additional intangible asset acquisitions, changes
in foreign currency exchange rates, impairment of intangible assets, accelerated amortization of intangible assets
and other events.

8. Property and Equipment

Property and equipment consisted of the following:

Land
Buildings
Leasehold improvements
Furniture and equipment
Computer hardware and software
Construction-in-progress (1)

Property and equipment, gross

Accumulated depreciation

Property and equipment, net

April 24, 2021

April 25, 2020

12,014 $

118,582
31,125
188,594
244,537
17,665
612,517
(393,079)
219,438 $

11,919
119,585
29,427
181,986
226,114
89,604
658,635
(354,910)
303,725

(1)

Includes $6,326 and $68,728 of unamortized development costs of software to be sold as of April 24, 2021
and April 25, 2020, respectively.

9. Leases

We lease certain warehouses, office space, vehicles and equipment. Leases with an initial term of 12 months or
less are not recorded on the consolidated balance sheets. We recognize lease expense for these leases on a
straight-line basis over the lease term. We do not separate lease and non-lease components, and instead account
for each lease and non-lease component associated with that lease as a single lease component. Some leases
include one or more options to renew. The exercise of renewal options is at our sole discretion. Our lease
agreements do not contain significant residual value guarantees, restrictions or covenants.

Total lease costs for the fiscal year ended April 24, 2021 and April 25, 2020 were $34,712 and $36,302, respectively,
which include variable lease costs and short-term lease costs, which were immaterial.

The following table presents future maturities of lease liabilities:

2022
2023
2024
2025
2026
After 2026
Total lease payments

Less: imputed interest
Present value of lease liabilities

The following tables present other supplemental information related to leases:

34,304
25,121
15,569
6,731
1,826
1,328
84,879
(4,309)
80,570

Fiscal Year Ended

April 24, 2021

April 25, 2020

Cash paid for amounts included in the measurement of operating lease liabilities

Lease assets obtained in exchange for new operating lease liabilities

37,054 $

50,114 $

37,934

28,321

Weighted-average remaining lease term - operating leases

Weighted-average discount rate - operating leases

April 24, 2021

April 25, 2020

3.06 years

3.11 years

3.31 %

3.58 %

10. Debt

Our long-term debt consisted of the following:

Senior notes due fiscal 2022 (1)
Senior notes due fiscal 2024 (1)
Senior notes due fiscal 2025 (2)
Senior notes due fiscal 2028 (3)
Term loan due fiscal 2024 (4)
Less: Deferred debt issuance costs

Total debt

Less: Current maturities of long-term debt

Long-term debt

Interest Rate

April 24, 2021

April 25, 2020

Carrying Value

3.59 %

3.74 %

3.48 %

3.79 %

1.36 %

100,750

33,000

117,500

40,000

300,000

(2,955)

588,295

(100,750)

100,750

33,000

117,500

40,000

300,000

(3,484)

587,766

—

487,545 $

587,766

(1)

(2)

(3)

(4)

Issued in December 2011.
Issued in March 2015.
Issued in March 2018.
Issued in December 2019, amended in February 2021. Interest rate is 1-month LIBOR plus 1.25% as of
April 24, 2021.

Future principal payments due, based on stated contractual maturities for our long-term debt, were as follows as of
April 24, 2021:

Fiscal Year
2022

2023

2024

2025

2026

Thereafter

Total

100,750

—

333,000

117,500

—

40,000

591,250

In fiscal 2017, we entered into an amended credit agreement ("Amended Credit Agreement"), consisting of a
$295,075 term loan and a $750,000 revolving line of credit. In March 2019, we permanently reduced the capacity
under the revolving line of credit to $500,000. Interest on borrowings was variable and was determined as a base
rate plus a spread. This spread, as well as a commitment fee on the unused portion of the facility, was based on our
leverage ratio, as defined in the Amended Credit Agreement. During the quarter ended October 26, 2019, we repaid
the remaining $81,558 outstanding under the unsecured term loan.

In December 2019, we entered into a senior unsecured term loan facility agreement (the “Term Facility Agreement”),
consisting of a $300,000 term loan. Interest on borrowings was variable and was determined as a base rate plus a
spread. This spread was based on our leverage ratio, as defined in the Term Facility Agreement. The proceeds were
used to repay certain existing indebtedness, pay fees and expenses incurred in connection with the Term Facility
Agreement, and finance our ongoing working capital and other general corporate purposes. The Term Facility was
set to mature no later than December 20, 2022. As of April 25, 2020, $300,000 was outstanding under the Term
Facility at an interest rate of 1.87%.

In fiscal 2021, we entered into an amendment, restatement and consolidation of the Amended Credit Agreement
and the Term Facility Agreement 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 $700,000
revolving credit facility and a $300,000 term loan facility, and will mature no later than February 2024. We used the
facilities to refinance and consolidate the Amended Credit Agreement and the Term Facility Agreement, pay the fees
and expenses incurred therewith, and finance our ongoing working capital and other general corporate purposes.

As of April 24, 2021, $300,000 was outstanding under the Credit Agreement term loan at an interest rate of 1.36%
and $53,000 was outstanding under the Credit Agreement revolving credit facility at an interest rate of 1.34%.

During the three months ended January 25, 2020, we repaid certain indebtedness totaling $373,750. As a result, we
recorded a pre-tax non-cash charge of $8,984 during the three months ended January 25, 2020. This charge relates
to the January 2014 forward interest rate swap agreement and accelerated amortization of debt issuance costs.

We are subject to various financial covenants under our debt agreements including the maintenance of leverage
and interest coverage ratios. In the event of our default, any outstanding obligations may become due and payable
immediately. We were in compliance with the covenants under our debt agreements as of April 24, 2021.

11. Income Taxes

The components of income (loss) before taxes were as follows:

Income (loss) before taxes

United States

International

Total

April 24,
2021

Fiscal Year Ended

April 25,
2020

April 27,
2019

166,251 $

(594,431) $

33,680

4,024

76,035

30,193

199,931 $

(590,407) $

106,228

Significant components of income tax expense (benefit) were as follows:

Current:

Federal
Foreign
State

Total current expense

Deferred:

Federal
Foreign
State

Total deferred (benefit) expense

Income tax expense (benefit)

U.S. Tax Reform

Fiscal Year Ended

April 24,
2021

April 25,
2020

April 27,
2019

36,836 $

18,300 $

9,975
8,771
55,582

7,501
4,959
30,760

(7,529)
(362)
(2,869)
(10,760)
44,822 $

(25,918)
164
(6,046)
(31,800)

(1,040) $

(19)
9,207
3,402
12,590

9,709
(53)
1,106
10,762
23,352

On December 22, 2017, the Tax Cuts and Jobs Act (the "Tax Act") was enacted into law. The Tax Act significantly
revises the future ongoing U.S. federal corporate income tax by, among other things, lowering the U.S. federal
corporate tax rate, implementing a territorial tax system, imposing a one-time transition tax on earnings of certain
foreign subsidiaries that were previously tax deferred, and created new taxes on foreign sourced earnings.

During the fiscal year ended April 27, 2019, we completed our accounting for the previously recorded provisional
impacts of the Tax Act and recorded additional remeasurement benefit of $2,355 on U.S. deferred tax assets and
liabilities and a reduction to the transition tax cost of $331.

While we have completed our accounting for the impacts of the Tax Act, changes in interpretation of the Tax Act,
analysis of proposed and final regulations as they are issued, current and additional guidance from the Internal
Revenue Service and/or state legislative actions as well as potential changes in accounting standards surrounding
income taxes and the Tax Act may result in further, potentially material, changes to these completed computations.

On March 27, 2020, the “Coronavirus Aid, Relief and Economic Security (CARES) Act” was signed into law. The
CARES Act, among other things, includes provisions relating to refundable employment tax credits, deferment of
employer side social security payments, net operating loss carryback periods, alternative minimum tax credit
refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods
for qualified improvement property. These benefits did not materially impact the Company’s effective tax rate for the
fiscal years ended April 24, 2021 or April 25, 2020. On December 27, 2020, the Consolidated Appropriations Act
was signed into law. The act extended numerous non-income tax benefits from the CARES Act. We are continuing
to evaluate these tax related provisions as additional guidance from the Internal Revenue Service and/or state tax
authorities becomes available.

Deferred tax assets and liabilities are included in other non-current assets and deferred income taxes on the
consolidated balance sheets. Significant components of our deferred tax assets (liabilities) were as follows:

Deferred tax assets:

Capital accumulation plan
Inventory related items
Bad debt allowance
Stock-based compensation expense
Interest rate swap
Foreign tax credit
Lease liability
Other

Gross deferred tax assets

Less: Valuation allowance

Total net deferred tax assets
Deferred tax liabilities
LIFO reserve
Amortizable intangibles
Goodwill
Property and equipment, net
Operating lease right-of-use assets, net

Total deferred tax liabilities
Deferred net long-term income tax liability

April 24,
2021

April 25,
2020

1,051 $

12,250
1,416
7,036
1,261
7,112
16,153
242
46,521
(15,960)
30,561

2,541
10,354
1,857
7,486
1,580
7,248
16,572
2,945
50,583
(14,886)
35,697

(25,913)
(61,023)
(13,902)
(37,967)
(15,547)
(154,352)
(123,791) $

(32,630)
(69,254)
(11,848)
(39,999)
(16,195)
(169,926)
(134,229)

At April 24, 2021, we had a U.S. foreign tax credit asset that will expire in five years. In addition, we have deferred
tax assets which would give rise to tax capital losses if triggered in the future. These losses can only be used
against capital gain income. At this time, we believe that it is more likely than not that the foreign tax credit and
potential capital loss carryforward attributes totaling $15,960 will not be fully utilized prior to expiration. As a result, a
full valuation allowance has been established against these assets.

With regard to unremitted earnings of foreign subsidiaries generated after December 31, 2017, we do not currently
provide for U.S. taxes since we intend to reinvest such undistributed earnings indefinitely outside of the United
States. We continue to apply ASC 740 based on the provisions of the tax law that were in effect immediately prior to
the enactment of the new law.

Income tax expense (benefit) varies from the amount computed using the U.S. statutory rate. The reasons for this
difference and the related tax effects are shown below.

Tax at U.S. statutory rate
State tax provision, net of federal benefit
Effect of foreign taxes
Goodwill impairment
Legal settlement
ESOP
Other permanent differences
Tax reform
Other

Income tax expense (benefit)

Fiscal Year Ended

April 24,
2021

41,984 $

April 25,
2020
(123,987) $

5,400
2,594
—
—
(2,286)
808
—
(3,678)
44,822 $

(466)
7,277
107,999
11,088
(2,393)
1,533
—
(2,091)
(1,040) $

April 27,
2019

22,306
3,492
2,728
—
—
(2,465)
1,074
(2,686)
(1,097)
23,352

We have accounted for the uncertainty in income taxes recognized in the financial statements in accordance with
ASC Topic 740, “Income Taxes”. This standard clarifies the separate identification and reporting of estimated
amounts that could be assessed upon audit. The potential assessments are considered unrecognized tax benefits,
because, if it is ultimately determined they are unnecessary, the reversal of these previously recorded amounts will
result in a beneficial impact to our financial statements.

As of April 24, 2021 and April 25, 2020, Patterson’s gross unrecognized tax benefits were $10,866 and $11,740,
respectively. If determined to be unnecessary, these amounts (net of deferred tax assets of $2,055 and $2,113,
respectively, related to the tax deductibility of the gross liabilities) would decrease our effective tax rate. The gross
unrecognized tax benefits are included in other non-current liabilities on the consolidated balance sheets.

A summary of the changes in the gross amounts of unrecognized tax benefits is shown below.

Balance at beginning of period
Additions for tax positions related to the current year
Additions for tax positions of prior years
Reductions for tax positions of prior years
Statute expirations
Settlements
Balance at end of period

April 24,
2021

April 25,
2020

11,740 $

1,264
20
(220)
(1,938)
—
10,866 $

13,035
1,182
218
(37)
(2,289)
(369)
11,740

We also recognize both interest and penalties with respect to unrecognized tax benefits as a component of income
tax expense. As of April 24, 2021 and April 25, 2020, we had recorded $2,026 and $1,968, respectively, for interest
and penalties. These amounts are also included in other non-current liabilities on the consolidated balance sheets.
These amounts, net of related deferred tax assets, if determined to be unnecessary, would decrease our effective
tax rate. During the year ended April 24, 2021, we recorded as part of tax expense $218 related to an increase in
our estimated liability for interest and penalties.

Patterson files income tax returns, including returns for our subsidiaries, with federal, state, local and foreign
jurisdictions. During fiscal 2021, the Internal Revenue Service (“IRS”) concluded an audit of fiscal year ended April
28, 2018. The IRS has either examined or waived examination for all periods up to and including our fiscal year
ended April 28, 2018. In addition to the IRS, periodically, state, local and foreign income tax returns are examined
by various taxing authorities. We do not believe that the outcome of these various examinations will have a material
adverse impact on our financial statements.

12. 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. We 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 fiscal 2021 and 2020, net loss
attributable to the noncontrolling interest was $872 and $921, respectively, resulting in noncontrolling interests of
$1,455 on the consolidated balance sheets at April 24, 2021.

13. 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 (loss). The costs to operate the fulfillment centers are allocated to the
business units based on the through-put of the unit.

The following tables present information about our reportable segments and the geographic areas in which we
operate:

Consolidated net sales

United States

United Kingdom

Canada

Total

Dental net sales

United States
Canada

Total

Animal Health net sales

United States

United Kingdom
Canada

Total

Corporate net sales

United States
Total

April 24,
2021

Fiscal Year Ended

April 25,
2020

April 27,
2019

4,877,070 $

4,554,345 $

4,638,184

677,910

357,086

608,320

327,346

597,953

338,386

5,912,066 $

5,490,011 $

5,574,523

2,107,521 $

1,900,539 $

1,989,875

219,500

201,383

201,915

2,327,021 $

2,101,922 $

2,191,790

2,744,498 $

2,601,970 $

2,620,104

677,910

137,586

608,320

125,963

597,953

136,471

3,559,994 $

3,336,253 $

3,354,528

25,051 $

51,836 $

28,205

Consolidated net sales

Consumable

Equipment and software
Value-added services and other

Total

Dental net sales

Consumable

Equipment and software
Value-added services and other

Total

Animal Health net sales

Consumable

Equipment and software

Value-added services and other

Total

Corporate net sales

Value-added services and other

Total

April 24,
2021

Fiscal Year Ended

April 25,
2020 1

April 27,
2019 1

4,748,441 $

4,374,829 $

4,488,224

822,267

341,358

749,390

365,792

753,937

332,362

5,912,066 $

5,490,011 $

5,574,523

1,314,261 $

1,141,189 $

1,221,022

731,132

281,628

677,677

283,056

694,996

275,772

2,327,021 $

2,101,922 $

2,191,790

3,434,180 $

3,233,640 $

3,267,202

91,135

34,679

71,713

30,900

58,941

28,385

3,559,994 $

3,336,253 $

3,354,528

25,051 $

51,836 $

28,205

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

Operating income (loss)

Dental

Animal Health

Corporate

Consolidated operating income (loss)

Depreciation and amortization

Dental

Animal Health

Corporate

April 24,
2021

Fiscal Year Ended

April 25,
2020

April 27,
2019

201,244 $

168,304 $

88,123

(78,760)

(594,743)

(145,680)

210,607 $

(572,119) $

179,236

81,472

(122,992)

137,716

7,774 $

8,434 $

45,771

23,004

49,958

23,790

8,792

49,362

24,619

82,773

Consolidated depreciation and amortization

76,549 $

82,182 $

Property and equipment, net

United States

United Kingdom

Canada

Total property and equipment, net

Total assets

Dental

Animal Health

Corporate

Total assets

14. Stockholders’ Equity

Dividends

April 24,
2021

April 25,
2020

209,361 $

294,169

2,471

7,606

2,030

7,526

219,438 $

303,725

April 24,
2021

April 25,
2020

863,718 $

704,216

1,391,892

495,901

1,485,284

525,850

2,751,511 $

2,715,350

The following table presents our declared cash dividends per share on our common stock for the past three years.
Dividends were declared and paid in the same period during fiscal 2020 and 2019. In fiscal 2021, dividends were
declared in the period presented and paid in the following quarter.

Fiscal year
2021

2020

2019

Share Repurchases

Quarter

0.26 $

0.26

During fiscal 2021, 2020 and 2019, we had no repurchases of shares of our common stock.

On March 16, 2021, the Board of Directors authorized a $500,000 share repurchase program through March 16,
2024. As of April 24, 2021, $500,000 remains available under the current repurchase authorization.

ESOP

In 1990, Patterson’s Board of Directors adopted a leveraged ESOP. In fiscal 1991, under the provisions of the plan
and related financing arrangements, Patterson loaned the ESOP $22,000 (the “1990 note”) for the purpose of
acquiring its then outstanding preferred stock, which was subsequently converted to common stock. The Board of
Directors determines the contribution from the Company to the ESOP annually. The contribution is used to retire a
portion of the debt, which triggers a release of shares that are then allocated to the employee participants. Shares
of stock acquired by the plan are allocated to each participant who has completed 1000 hours of service during the
plan year. In fiscal 2011, the final payment on the 1990 note was made and all remaining shares were released for
allocation to participants.

In fiscal 2002, Patterson’s ESOP and an ESOP sponsored by the Thompson Dental Company (“Thompson”) were
used to facilitate the acquisition and merger of Thompson into Patterson. The net result of this transaction was an
additional loan of $12,612 being made to the ESOP and the ESOP acquiring 666 shares of common stock. The loan
bore interest at then-current rates, but principal did not begin to amortize until fiscal 2012. Beginning in fiscal 2012
and through fiscal 2020, an annual payment of $200 plus interest was due. In fiscal 2021, a final payment of the
outstanding principal and interest balance was due and was made. Of the 666 shares issued in the transaction, 98
were previously allocated to Thompson employees. The remaining 568 shares began to be allocated in fiscal 2004
as interest was paid on the loan.

In September 2006, we entered into a third loan agreement with the ESOP and loaned $105,000 (the “2006 note”)
for the sole purpose of enabling the ESOP to purchase shares of our common stock. The ESOP purchased 3,160
shares with the proceeds from the 2006 note. Interest on the unpaid principal balance accrued at a rate equal to six-
month LIBOR, with the rate resetting semi-annually. Interest payments were not required during the period from and
including September 11, 2006 through April 30, 2010. On April 30, 2010, accrued and unpaid interest was added to
the outstanding principal balance under the note, with interest thereafter accruing on the increased principal
amount. Unpaid interest accruing after April 30, 2010 was due and payable on each successive April 30. In fiscal
2021, a final payment of the outstanding principal and interest balance was made. In fiscal 2012, Patterson
contributed $20,214 to the ESOP, which then purchased 844 shares for allocation to the participants. No shares
secured by the 2006 note were released prior to fiscal 2011.

At April 24, 2021, a total of 9,992 shares of common stock that have been allocated to participants remained in the
ESOP and had a fair market value of $321,153. Related to the shares from the Thompson transaction, committed-
to-be-released shares were 379 and no suspense shares remain. Finally, with respect to the 2006 note, committed-
to-be-released shares were 230 and no suspense shares remain.

Unearned ESOP shares are not considered outstanding for the computation of earnings per share until the shares
are committed for release to the participants. During fiscal 2021, 2020 and 2019, the compensation expense
recognized related to the ESOP was $9,265, $14,419 and $13,740, respectively.

In fiscal 2021, we allocated the remaining suspense shares to eligible ESOP participants. We will recognize an
income tax deduction on the unearned ESOP shares released. Such deductions will be limited to the ESOP’s
original cost to acquire the shares. Going forward, we will no longer be contributing to the ESOP and instead will be
making cash-based 401(k) contributions.

Dividends on allocated shares are passed through to the ESOP participants.

15. Stock-based Compensation

The consolidated statements of operations and other comprehensive income (loss) for fiscal 2021, 2020 and 2019
include pre-tax (after-tax) stock-based compensation expense of $21,223 ($16,387), $22,935 ($17,789) and
$19,685 ($15,588), respectively. Pre-tax expense is included in operating expenses within the consolidated
statements of operations and other comprehensive income (loss).

As of April 24, 2021, the total unrecognized compensation cost related to non-vested awards was $23,830, and it is
expected to be recognized over a weighted average period of approximately 1.4 years.

2015 Omnibus Incentive Plan

In September 2015, our shareholders approved the 2015 Omnibus Incentive Plan ("Incentive Plan"), which was
amended and restated in September 2018. The aggregate number of shares of common stock that may be issued
is 11,500. The Incentive Plan authorizes various award types to be issued under the plan, including stock options,
restricted stock awards, restricted stock units, stock appreciation rights, performance awards, non-employee
director awards, cash-based awards and other stock-based awards. We issue new shares for stock option
exercises, restricted stock award grants and also for vesting of restricted stock units and performance stock units.
Awards that expire or are canceled without delivery of shares generally become available for reissuance under the
plan.

At April 24, 2021, there were 3,832 shares available for awards under the Incentive Plan.

As a result of the approval of the Incentive Plan, awards are no longer granted under any prior equity incentive plan,
but all outstanding awards previously granted under such prior plans will remain outstanding and subject to the
terms of such prior plans. At April 24, 2021, there were 382 shares outstanding under prior plans.

Inducement Awards

On June 29, 2018, we issued a combination of non-statutory stock options and restricted stock units outside our
Incentive Plan to our Chief Financial Officer. The stock option covers 99 shares of our common stock, has an
exercise price of $22.67 per share, and has a 10-year term. Such award will vest, assuming continued employment,
to the extent of one-third of the award on the first anniversary of the date of grant, one-third of the award on the
second anniversary of the date of grant, and the remaining one-third of the award on the third anniversary of the
date of grant. The restricted stock unit award covers 31 shares of our common stock. Such award will vest,

assuming continued employment, to the extent of 50% of the award on the first anniversary of the date of grant and
the remaining 50% of the award on the second anniversary of the date of grant.

Stock Option Awards

Stock options granted to employees expire no later than ten years after the date of grant. Awards typically vest over
three or five years.

The fair value of stock options granted was estimated as of the grant date using a Black-Scholes option-pricing
model with the following assumptions:

Expected dividend yield
Expected stock price volatility
Risk-free interest rate
Expected life (years)
Weighted average grant date fair value per share

The following is a summary of stock option activity:

Balance as of April 25, 2020

Granted
Exercised
Canceled

Balance as of April 24, 2021
Vested or expected to vest as of April 24, 2021
Exercisable as of April 24, 2021

Fiscal Year Ended

April 24,
2021

April 25,
2020

April 27,
2019

4.4 %
34.6 %
0.4 %
6.0
4.60 $

4.7 %
26.8 %
1.8 %
6.0
3.37 $

4.5 %
24.6 %
2.9 %
6.2
3.66

Number
of
Options

Weighted-
Average
Exercise
Price

Aggregate
Intrinsic
Value

2,433 $
540
(146)
(130)
2,697 $
2,655 $
1,035 $

29.08
23.57
23.29
28.62
28.31 $
28.39 $
36.14 $

22,969
22,526
5,718

The weighted average remaining contractual lives of options outstanding and options exercisable as of April 24,
2021 were 7.4 and 6.2 years, respectively.

Related to stock options exercised, the intrinsic value, cash received and tax benefits realized were $953, $3,399
and $129, respectively, in fiscal 2021; and $2, $13 and $0, respectively, in fiscal 2019. No stock options were
exercised in fiscal 2020.

Restricted Stock

Restricted stock awards and restricted stock units granted to employees generally vest over a three, five or seven
year period. Certain restricted stock awards, which are held by branch managers, are subject to accelerated vesting
provisions beginning three years after the grant date, based on certain operating goals. Restricted stock awards are
also granted to non-employee directors annually and vest over one year. The grant date fair value of restricted stock
awards and restricted stock units is based on the closing stock price on the day of the grant. The total fair value of
restricted stock awards and restricted stock units that vested in fiscal 2021, 2020 and 2019 was $11,672, $8,788
and $5,683, respectively.

The following is a summary of restricted stock award activity:

Outstanding at April 25, 2020
Granted
Vested
Forfeitures
Outstanding at April 24, 2021

The following is a summary of restricted stock unit activity:

Outstanding at April 25, 2020

Granted

Vested

Forfeitures

Outstanding at April 24, 2021

Performance Unit Awards

Restricted Stock Awards

Weighted-
Average
Grant Date
Fair Value

106 $

33
(85)
—
54 $

32.71
24.66
30.93
—
30.63

Restricted Stock Units

Weighted-
Average
Grant Date
Fair Value

27.16

23.62

27.82

24.24

25.65

1,216 $

513

(418)

(70)

1,241 $

In fiscal 2021, 2020 and 2019, we granted performance unit awards to certain executives which are earned at the
end of a three-year period if certain operating goals are met. The number of shares to be received at vesting related
to the fiscal 2021 awards will be determined by performance measured over three successive annual measurement
periods and ultimately modified by Patterson's total shareholder return ("TSR") relative to the performance of
companies in the S&P Midcap 400 Index measured over a three-year period. We estimate the grant date fair value
of the TSR awards using the Monte Carlo valuation model. We recognize expense over the requisite service period
based on the outcome that is probable for these awards. The total fair value of performance unit awards that vested
in fiscal 2021 was $4,227. No performance unit awards vested in fiscal 2020 and 2019.

The following is a summary of performance unit award activity at target:

Outstanding at April 25, 2020
Granted
Vested
Forfeitures and cancellations
Outstanding at April 24, 2021

Employee Stock Purchase Plan ("ESPP")

Performance Unit Awards

Weighted-
Average
Grant Date
Fair Value

362 $
146
(133)
(87)
288 $

26.38
23.62
25.30
34.80
22.94

We sponsor an ESPP under which a total of 9,000 shares have been reserved for purchase by employees. Eligible
employees may purchase shares at 85% of the lower of the fair market value of our common stock on the beginning
of the annual offering period, or on the end of each quarterly purchase period, which occur on March 31, June 30,
September 30 and December 31. The offering periods begin on January 1 of each calendar year and end on
December 31 of each calendar year. At April 24, 2021, there were 1,734 shares available for purchase under the
ESPP.

We estimate the grant date fair value of shares purchased under our ESPP using the Black-Scholes option pricing
valuation model with the following assumptions:

Expected dividend yield
Expected stock price volatility
Risk-free interest rate
Expected life (years)
Weighted average grant date fair value per share

16. Litigation

Fiscal Year Ended

April 24,
2021

April 25,
2020

April 27,
2019

3.6 %
51.7 %
0.1 %
0.6
8.77 $

5.1 %
34.3 %
1.6 %
0.6
4.98 $

5.2 %
38.6 %
2.5 %
0.6
5.21

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 or 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 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 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 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, recommends
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
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. While the outcome of litigation is inherently uncertain,
we believe that the class action complaint is without merit, and we are vigorously defending ourselves in this
litigation. We do not anticipate that this matter will have a material adverse effect on our financial statements.
Patterson has also received, and responded to, requests under Minnesota Business Corporation Act § 302A.461 to
inspect corporate books and records relating to the issues raised in the securities class action complaint and certain
antitrust litigation.

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 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” 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 six 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
asserts three 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.

17. Quarterly Results (unaudited)

Quarterly results are determined in accordance with the accounting policies used for annual data and include
certain items based upon estimates for the entire year. All fiscal quarters presented include results for 13 weeks.

Net sales

Gross profit

Operating income (loss)

Net income (loss)

Net loss attributable to noncontrolling interests
Net income (loss) attributable to Patterson
Companies, Inc.
Earnings (loss) per share attributable to
Patterson Companies, Inc.:

Quarter Ended

April 24, 2021

January 23, 2021

October 24, 2020

July 25, 2020

$ 1,561,793 $

1,551,268 $

1,553,168 $ 1,245,837

304,405

37,348

28,514

324,541

61,681

48,567

320,368

73,706

53,826

253,816

37,872

24,202

(241)

(192)

(234)

(205)

28,755 $

48,759 $

54,060 $

24,407

Basic

Diluted

0.30 $

0.51 $

0.50 $

0.57 $

0.56 $

0.26

0.25

Net sales

Gross profit

Operating income (loss)

Net income (loss)

Net loss attributable to noncontrolling interests
Net income (loss) attributable to Patterson
Companies, Inc.
Earnings (loss) per share attributable to
Patterson Companies, Inc.:

Quarter Ended

April 25, 2020 (1)

January 25, 2020

October 26, 2019 (2)

July 27, 2019 (3)

$ 1,286,461 $

1,456,155 $

1,418,744 $ 1,328,651

294,032

(614,463)

(608,797)

(211)

311,830

43,816

22,972

(255)

301,494

(18,146)

(33,349)

(220)

290,054

16,674

29,807

(235)

(608,586) $

23,227 $

(33,129) $

30,042

Basic

Diluted

(6.44) $

0.25 $

0.24 $

(0.35) $

0.32

(1) In the fourth quarter of fiscal 2020, we recorded goodwill impairment charges totaling $675,055 in our
Animal Health segment. See Note 1 for additional information. In addition, the COVID-19 virus had a
significant impact on our businesses in the fourth quarter of fiscal 2020. Through March 2020, sales in our
Dental and Animal Health segments were up year over year. In April 2020, our Dental segment sales were
down approximately 71% and our Animal Health segment sales were down approximately 9%, as compared
to April 2019. In addition, operating expenses were also down significantly in April 2020 as certain variable
expenses decreased with sales.

(2) We incurred costs and expenses of $58,300 during the second quarter of fiscal 2020 related to the then-
probable settlement of an investigation by the U.S. Attorney's Office for the Western District of Virginia.

(3) We recorded a pre-tax gain of $34,334 related to one of our investments during the first quarter of fiscal
2020. This gain was based on the selling price of preferred stock in this investment that is similar to the
preferred stock we own, and was adjusted for differences in liquidation preferences. In addition, we incurred
expenses of $17,666 during the first quarter of fiscal 2020 related to the settlement of litigation with
SourceOne Dental, Inc.

18. Accumulated Other Comprehensive Loss ("AOCL")

The following table summarizes the changes in AOCL as of April 24, 2021:

AOCL at April 25, 2020
Other comprehensive income before reclassifications
Amounts reclassified from AOCL
AOCL at April 24, 2021

Cash Flow
Hedges

Currency
Translation
Adjustment

(5,538) $
—
1,042
(4,496) $

(91,501) $
33,405
—
(58,096) $

Total
(97,039)
33,405
1,042
(62,592)

The amounts reclassified from AOCL during fiscal 2021 represent gains and losses on cash flow hedges, net of
taxes of $321. The impact to the consolidated statements of operations and other comprehensive income (loss) was
an increase to interest expense of $1,363 for fiscal 2021.

19. Subsequent Events

During the first quarter of fiscal 2022, we entered into an agreement to sell a portion of one of our investments,
which we expect to close in the first quarter of fiscal 2022. We expect to receive cash proceeds of approximately
$54,000, and to record a pre-tax gain of approximately $28,000 in other income, net in our consolidated statements
of operations and other comprehensive income (loss) as a result of this sale. Also related to this transaction, we
expect to record a non-cash gain in the first quarter of fiscal 2022 related to the remaining portion of this investment.

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE

None.

Item 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and our
Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and
procedures pursuant to Rules 13a-15 and 15d-15 of the Securities and Exchange Act of 1934 (the “Exchange Act”).
Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure
controls and procedures were effective as of April 24, 2021. Disclosure controls and procedures are defined by
Rules 13a-15(e) and 15d-15(e) of the Exchange Act as controls and other procedures that are designed to ensure
that information required to be disclosed by Patterson in reports filed with the SEC under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that
information required to be disclosed in reports filed under the Exchange Act is accumulated and communicated to
our management, including our principal executive and principal financial officers, or persons performing similar
functions, as appropriate to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control Over Financial Reporting

The management of Patterson Companies, Inc. is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal
control system is designed to provide reasonable assurance to our management and Board of Directors regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles.

Under the supervision and with the participation of our management, including our principal executive officer and
principal financial officer, we assessed the effectiveness of our internal control over financial reporting as of April 24,
2021, using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO) in Internal Control - Integrated Framework (2013). Based on this assessment, management has concluded
that our internal control over financial reporting was effective as of April 24, 2021. Ernst & Young LLP, the
independent registered public accounting firm that audited our consolidated financial statements included in Item 8,
Financial Statements and Supplementary Data, of this Annual Report on Form 10-K, has issued an unqualified
report on our internal control over financial reporting as of April 24, 2021.

/s/ Mark S. Walchirk
President and Chief Executive Officer

/s/ Donald J. Zurbay
Chief Financial Officer and Treasurer

The report of our independent registered public accounting firm on internal control over financial reporting is
included in Item 8 of this Annual Report on Form 10-K.

Changes in Internal Control Over Financial Reporting

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 April 24, 2021 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial reporting.

9B. OTHER INFORMATION

None.

PART III

Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Information regarding the directors of Patterson is incorporated herein by reference to the descriptions set forth
under the caption “Proposal No. 1 Election of Directors” in Patterson’s Proxy Statement for its Annual Meeting of
Shareholders to be held on September 13, 2021 (the “2021 Proxy Statement”). Information regarding executive
officers of Patterson is incorporated herein by reference to Item 1 of Part I of this Form 10-K under the caption
“Information About Our Executive Officers.” Information regarding compliance with Section 16(a) of the Securities
Exchange Act of 1934 is incorporated herein by reference to the information set forth under the caption “Section
16(a) Reports” in the 2021 Proxy Statement. The information called for by Item 10, as to the audit committee and
the audit committee financial expert, is set forth under the captions “Proposal No. 1 Election of Directors” and “Our
Board of Directors and Committees” in the 2021 Proxy Statement and such information is incorporated by reference
herein.

Code of Ethics

We have adopted and published a Code of Conduct, which provides an overview of the laws, regulations, and
company policies that apply to our employees and our directors and is intended to comply with applicable NASDAQ
Marketplace Rules. Our Code of Conduct is available on our website (www.pattersoncompanies.com) under the
section “Investor Relations – Corporate Governance.” We intend to satisfy the disclosure requirement of Form 8-K
regarding an amendment to, or waiver from, a provision of our Code of Conduct that applies to our principal
executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar
functions and that relates to any element of the code of ethics definition enumerated in Item 406(b) of Regulation S-
K by posting such information on our website at the address and location specified above.

Item 11. EXECUTIVE COMPENSATION

Information regarding executive compensation is incorporated herein by reference to the information set forth under
the caption “Executive Compensation” in the 2021 Proxy Statement. Information regarding director compensation is
incorporated herein by reference to the information set forth under the caption “Non-Employee Director
Compensation” in the 2021 Proxy Statement. Information regarding the compensation committee and its report is
incorporated herein by reference to the information set forth under the caption “Our Board of Directors and
Committees - Committee Responsibilities - Our Compensation Committee and Its Report” in the 2021 Proxy
Statement.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS

Information regarding securities authorized for issuance under equity compensation plans is incorporated herein by
reference to the information set forth under the caption “Equity Compensation Plan Information” in the 2021 Proxy
Statement. Information regarding the security ownership of certain beneficial owners and management is
incorporated herein by reference to the information set forth under the caption “Security Ownership of Certain
Beneficial Owners and Management” in the 2021 Proxy Statement.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Information regarding transactions with related persons is incorporated herein by reference to the information set
forth under the caption “Certain Relationships and Related Transactions” in the 2021 Proxy Statement. Information
regarding director independence is incorporated herein by reference to the information set forth under the caption
“Our Board of Directors and Committees” in the 2021 Proxy Statement.

Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Information relating to principal accounting fees and services and pre-approval policies and procedures is
incorporated herein by reference to the information set forth under the caption “Proposal No. 4 Ratification of
Selection of Independent Registered Public Accounting Firm – Principal Accountant Fees and Services” in the 2021
Proxy Statement.

Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

PART IV

(a)

1. Financial Statements.

The following Consolidated Financial Statements and supplementary data of Patterson and its
subsidiaries are included in Part II, Item 8:

Reports of Independent Registered Public Accounting Firm

Consolidated Balance Sheets

Consolidated Statements of Operations and Other Comprehensive Income (Loss)

Consolidated Statement of Changes in Stockholders’ Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

2. Financial Statement Schedules.

The following financial statement schedule is filed herewith: Schedule II – Valuation and Qualifying
Accounts

Schedules other than that listed above have been omitted because they are not applicable or the
required information is included in the financial statements or notes thereto.

3. Exhibits.

Exhibit

Document Description

3.1

3.2

4.1

4.2

10.1

10.2

10.3

10.4

10.5

10.6

Restated Articles of Incorporation (incorporated by reference to our Quarterly Report
on Form 10-Q, filed September 9, 2004 (File No. 000-20572)).

Amended and Restated Bylaws (incorporated by reference to our Current Report on
Form 8-K, filed December 13, 2013 (File No. 000-20572)).

Specimen form of Common Stock Certificate (incorporated by reference to our
Quarterly Report on Form 10-Q, filed September 9, 2004 (File No. 000-20572)).

Description of Securities (incorporated by reference to our Annual Report on Form 10-
K, filed June 24, 2020 (File No. 000-20572).

Patterson Companies, Inc. Summary of Material Terms of Management Incentive
Compensation Plan for Fiscal 2021 (filed herewith).**

Patterson Companies, Inc. Amended and Restated Employee Stock Purchase Plan
(incorporated by reference to Annex A to our Definitive Schedule 14A (Proxy
Statement), filed August 2, 2019 (File No. 000-20572)).**

Patterson Dental Company Amended and Restated Employee Stock Ownership Plan,
effective May 1, 2001 (incorporated by reference to our Annual Report on Form 10-K,
filed July 25, 2002 (File No. 000-20572)).**

Deferred Profit Sharing Plan for the Employees of Patterson Dental Canada Inc.
(incorporated by reference to our Definitive Proxy Statement, filed July 28, 2008 (File

Patterson Companies, Inc. Amended and Restated Equity Incentive Plan (incorporated
by reference to our Definitive Proxy Statement, filed August 7, 2012 (File No.

Patterson Companies, Inc. 2014 Sharesave Plan (incorporated by reference to our
Definitive Proxy Statement, filed August 5, 2014 (File No. 000-20572)).**

10.7

10.8

10.9

10.10

10.11

10.12

10.13

10.14

10.15

10.16

10.17

10.18

10.19

10.20

10.21

10.22

10.23

Patterson Companies, Inc. Amended and Restated 2015 Omnibus Incentive Plan
(incorporated by reference to Annex A to our Definitive Schedule 14A (Proxy
Statement), filed August 6, 2018 (File No. 000-20572)).**

The Executive Nonqualified Excess Plan (incorporated by reference to our Annual
Report on Form 10-K, filed June 24, 2020 (File No. 000-20572)).**

Form of Non-Statutory Stock Option Agreement under the Amended and Restated
2015 Omnibus Incentive Plan (filed herewith). **

Form of Restricted Stock Unit Agreement for Directors under the Amended and
Restated 2015 Omnibus Incentive Plan (filed herewith).**

Form of Restricted Stock Unit Agreement for Executive Officers under the Amended
and Restated 2015 Omnibus Incentive Plan (filed herewith).**

Form of Performance Share Unit Award Agreement under the Amended and Restated
2015 Omnibus Incentive Plan (filed herewith).**

Employment Agreement by and between Patterson Companies, Inc. and Mark S.
Walchirk, dated October 23, 2017 (incorporated by reference to our Current Report on
Form 8-K, filed October 24, 2017 (File No. 000-20572)).**

Inducement RSU Award Agreement by and between Patterson Companies, Inc. and
Mark S. Walchirk, dated December 1, 2017 (incorporated by reference to our Annual
Report on Form 10-K, filed June 27, 2018 (File No. 000-20572)).**

Amendment No. 1 to Employment Agreement by and between Patterson Companies,
Inc. and Mark S. Walchirk, dated April 17, 2020 (incorporated by reference to our
Current Report on Form 8-K, filed April 20, 2020 (File No. 000-20572)).**

Offer Letter by and between Patterson Companies, Inc. and Donald J. Zurbay,
effective May 17, 2018 (incorporated by reference to our Current Report on Form 8-K,
filed May 23, 2018 (File No. 000-20572)).**

Form of Inducement, Severance & Change in Control Agreement by and between
Patterson Companies, Inc. and Donald J. Zurbay (incorporated by reference to our
Current Report on Form 8-K, filed May 23, 2018 (File No. 000-20572)).**

Form of Inducement Non Statutory Stock Option Agreement by and between Patterson
Companies, Inc. and Donald J. Zurbay (incorporated by reference to our Current
Report on Form 8-K, filed May 23, 2018 (File No. 000-20572)).**

Form of Inducement RSU Agreement by and between Patterson Companies, Inc. and
Donald J. Zurbay (incorporated by reference to our Current Report on Form 8-K, filed
May 23, 2018 (File No. 000-20572)).**

Inducement, Severance and Change-in-Control Agreement by and between Patterson
Companies, Inc. and Eric Shirley, dated February 4, 2019 (incorporated by reference
to our Annual Report on Form 10-K, filed June 26, 2019 (File No. 000-20572).**

Restrictive Covenants, Severance and Change-in-Control Agreement by and between
Patterson Companies, Inc. and Kevin M. Pohlman, dated June 11, 2018 (incorporated
by reference to our Current Report on Form 8-K, filed June 12, 2018 (File No.

Restrictive Covenants, Severance and Change-in-Control Agreement by and between
Patterson Companies, Inc. and Les B. Korsh, dated June 11, 2018 (incorporated by
reference to our Current Report on Form 8-K, filed June 12, 2018 (File No.

Inducement, Severance and Change-in-Control Agreement by and between Patterson
Companies, Inc. and Andrea Frohning, dated May 21, 2018 (incorporated by reference
to our Annual Report on Form 10-K, filed June 26, 2019 (File No. 000-20572).**

10.24

10.25

10.26

10.27

10.28

10.29

10.30

10.31

10.32

10.33

10.34

10.35

Receivables Sale Agreement, dated as May 10, 2002, by and among Patterson Dental
Supply, Inc., Webster Veterinary Supply, Inc., and PDC Funding Company, LLC,
conformed through Amendment No. 4, dated as of October 9, 2018 (incorporated by
reference to our Quarterly Report on Form 10-Q, filed March 6, 2019 (File No.

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 Twentieth Amendment dated
February 5, 2021 (incorporated by reference to our Quarterly Report on Form 10-Q,

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, as agent (incorporated by
reference to our Quarterly Report on Form 10-Q, filed September 3, 2020 (File No.

Amended and Restated Receivables Sales Agreement dated August 12, 2011 by and
among Patterson Dental Supply, Inc., Webster Veterinary Supply, Inc. and PDC
Funding Company II, LLC (incorporated by reference to our Annual Report on Form
10-K, filed June 24, 2015 (File No. 000-20572)).

Note Purchase Agreement, dated December 8, 2011, by and among Patterson
Companies, Inc., Patterson Medical Holdings, Inc., Patterson Medical Supply, Inc.,
Patterson Dental Holdings, Inc., Patterson Dental Supply, Inc., Webster Veterinary
Supply, Inc., Webster Management, LP, conformed through Third Amendment, dated
April 24, 2020 (incorporated by reference to our Annual Report on Form 10-K, filed

Note Purchase Agreement, dated March 23, 2015, by and among Patterson
Companies, Inc., Patterson Medical Holdings, Inc., Patterson Medical Supply, Inc.,
Patterson Dental Holdings, Inc., Patterson Dental Supply, Inc., Patterson Veterinary
Supply, Inc., and Patterson Management, LP, conformed through Second Amendment,
dated April 24, 2020 (incorporated by reference to our Annual Report on Form 10-K,

Second Amended and Restated Credit Agreement dated as of February 16, 2021, by
and among Patterson Companies,
Inc., as borrower, MUFG Bank, Ltd., as
administrative agent, and certain lenders party thereto (incorporated by reference to
our Current Report on Form 8-K, filed February 16, 2021 (File No. 000-20572)).

Note Purchase Agreement, dated as of March 29, 2018, among Patterson Companies,
Inc., and certain of its named subsidiaries as borrowers, and various private lenders,
conformed through Second Amendment, dated April 24, 2020 (incorporated by
reference to our Annual Report on Form 10-K, filed June 24, 2020 (File No.

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
Seventh Amendment, dated April 23, 2021 (filed herewith).

Receivables Sale Agreement, dated as of July 24, 2018, by and between Patterson
Dental Supply, Inc., as seller, and PDC Funding Company III, LLC, as buyer
(incorporated by reference to our Current Report on Form 8-K, filed July 25, 2018 (File

Loan Agreement, dated December 20, 2019, among Patterson Companies, Inc., the
lenders from time to time parties thereto, and MUFG Bank Ltd., as administrative
agent (incorporated by reference to our Current Report on Form 8-K, filed December
23, 2019 (File No. 000-20572).

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 Fourth Amendment, dated April 23, 2021 (filed herewith).

10.36

31.1

31.2

32.1

32.2

101

Receivables Sale Agreement, dated as of January 15, 2020, by and between
Patterson Veterinary Supply, Inc., as seller, and PDC Funding Company IV, LLC, as
buyer (incorporated by reference to our Current Report on Form 8-K, filed January 17,

Subsidiaries (filed herewith).

Consent of Independent Registered Public Accounting Firm (filed herewith).

Certification of the Chief Executive Officer pursuant to Rules 13a-4(a) and 15d-14(a),
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

Certification of the Chief Financial Officer pursuant to Rule 13a-4(a) and 15d-14(a), as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

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 (filed herewith).

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 (filed herewith).

(Filed Electronically) The following financial information from our Annual Report on
Form 10-K for fiscal 2021, formatted in Inline eXtensible Business Reporting Language
(iXBRL): (i) the consolidated balance sheets, (ii) the consolidated statements of
operations and other comprehensive income (loss), (iii) the consolidated statements of
changes in stockholders’ equity, (iv) the consolidated statements of cash flows and (v)
the notes to the consolidated financial statements.(*)

(*)

The iXBRL related information in Exhibit 101 to this Annual Report on Form 10-K 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.

Indicates management contract or compensatory plan or agreement.

(b) See Index to Exhibits.

Item 16. Form 10-K Summary.

None.

SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS

PATTERSON COMPANIES, INC.

(In thousands)

Balance at
Beginning
of Period

Charged to
Costs and
Expenses

Charged
to Other
Accounts

Deductions

Balance at
End of
Period

Year ended April 24, 2021

Deducted from asset accounts:

Allowance for doubtful accounts
LIFO inventory adjustment
Inventory obsolescence reserve
Total inventory reserve

$
$

5,123 $
99,726 $
25,526
$ 125,252 $

2,559 $
21,049 $
45,761
66,810 $

— $
— $
—
— $

1,544 $
— $

41,658
41,658 $

6,138
120,775
29,629
150,404

Year ended April 25, 2020

Deducted from asset accounts:

Allowance for doubtful accounts
LIFO inventory adjustment
Inventory obsolescence reserve
Total inventory reserve

$
$

6,772 $
91,342 $
10,099
$ 101,441 $

2,008 $
8,384 $

27,405
35,789 $

— $
— $
—
— $

3,657 $
— $

11,978
11,978 $

5,123
99,726
25,526
125,252

Year ended April 27, 2019

Deducted from asset accounts:

Allowance for doubtful accounts
LIFO inventory adjustment
Inventory obsolescence reserve
Total inventory reserve

$
$

9,537 $
82,105 $

5,376

87,481 $

7,333 $
9,237 $

30,995
40,232 $

— $
— $
—
— $

10,098 $
— $

26,272
26,272 $

6,772
91,342
10,099
101,441

Pursuant to the requirements of section 13 or 15(d) 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.

SIGNATURES

Dated: June 23, 2021

PATTERSON COMPANIES, INC.
By /s/ Mark S. Walchirk
Mark S. Walchirk
President and Chief Executive
Officer, Director

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.

/s/ Mark S. Walchirk
Mark S. Walchirk

/s/ Donald J. Zurbay
Donald J. Zurbay

/s/ John D. Buck

John D. Buck

/s/ Alex N. Blanco

Alex N. Blanco

/s/ Jody H. Feragen

Jody H. Feragen

/s/ Robert C. Frenzel

Robert C. Frenzel

/s/ Francis J. Malecha

Francis J. Malecha

/s/ Ellen A. Rudnick

Ellen A. Rudnick

/s/ Neil A. Schrimsher

Neil A. Schrimsher

President and Chief Executive Officer,
Director
(Principal Executive Officer)

Date
June 23, 2021

Chief Financial Officer and Treasurer
(Principal Financial and Accounting
Officer)

June 23, 2021

Chairman of the Board

June 23, 2021

Director

(This page intentionally left blank)

Executive Officers
Mark S. Walchirk
President and
Chief Executive Officer

Donald J. Zurbay
Chief Financial Officer and Treasurer

Andrea L. Frohning
Chief Human Resources Officer

Les B. Korsh
Vice President,
General Counsel and Secretary

Kevin M. Pohlman
President, Animal Health

Tim E. Rogan
President, Dental

CORPORATE INFORMATION

Corporate Headquarters
1031 Mendota Heights Road
St. Paul, MN 55120-1419
651.686.1600
www.pattersoncompanies.com

Independent Auditors
Ernst & Young LLP
Minneapolis, MN

Legal Counsel
Taft Stettinius & Hollister LLP
Minneapolis, MN

Stock Transfer Agent
EQ Shareowner Services
1110 Centre Pointe Curve, Suite 101
Mendota Heights, MN 55120-4100
1-800-401-1957

Investor Relations Contact
John M. Wright
Vice President, Investor Relations

Annual Meeting
The annual meeting of shareholders of
Patterson Companies, Inc. will be held
virtually at 4:30 p.m., Central Daylight
Saving Time, on Monday, September 13,
2021. To attend the annual meeting
online, listen to the meeting live,
submit questions and vote, please visit
www.virtualshareholdermeeting.com/
PDCO2021.

Form 10-K
A copy of our annual report on
Form 10-K is available to shareholders
without charge in the investor relations
section of the Patterson website
(www.pattersoncompanies.com)
or by writing to: John M. Wright,
Vice President, Investor Relations at
the corporate headquarters.

Directors
John D. Buck ( C, D)
Chairman of the Board,
Chief Executive Officer
Whitefish Ventures, LLC

Mark S. Walchirk
President and
Chief Executive Officer
Patterson Companies, Inc.

Alex N. Blanco ( B, C)
Former Executive Vice President
and Chief Supply Chain Officer
Ecolab Inc.

Jody H. Feragen ( A, C)
Former Executive Vice President
and Chief Financial Officer
Hormel Foods Corporation

Robert C. Frenzel ( A, D)
President and
Chief Operating Officer
Xcel Energy Inc.

Francis J. Malecha ( A, B )
Manager of Hidden Lake
Vineyard, LLC

Ellen A. Rudnick ( B, D)
Senior Advisor on Entrepreneurship
University of Chicago
Booth School of Business

Neil A. Schrimsher ( B, C, D)
President and
Chief Executive Officer
Applied Industrial Technologies, Inc.

(A) Member of Audit Committee

(B) Member of Compensation Committee

(D) Member of Governance and

Nominating Committee

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WE ARE PATTERSON

When we say “We are Patterson,” it’s our way of telling our customers,

co-workers and communities that we are a trusted partner. It’s a

promise to live our values each day: We are Passionate. We are

Focused. We are People-First. We are Always Advancing. It reminds

us that no matter how the world around us may change, we are still

committed to being our very best. That’s why we are proud to say

“We are Patterson.”

1031 Mendota Heights Road
St. Paul, MN 55120-1419
651.686.1600

pattersoncompanies.com