Financial Performance - Net sales for the three months ended October 28, 2023, were $1,652,772, an increase of 1.6% compared to $1,626,204 for the same period in 2022[10]. - Gross profit for the six months ended October 28, 2023, was $658,081, up from $640,222 in the prior year, reflecting a growth of 2.9%[10]. - Operating income for the three months ended October 28, 2023, was $56,903, a decrease of 3.3% from $60,095 in the same period last year[10]. - Net income attributable to Patterson Companies, Inc. for the three months ended October 28, 2023, was $39,958, down 26.1% from $54,073 in the prior year[10]. - Net income for the six months ended October 28, 2023, was $70,985, a decrease of 8.3% compared to $77,909 for the same period in 2022[16]. - The company reported a comprehensive income of $22,526 for the three months ended October 28, 2023, compared to $36,318 in the same period last year[10]. - Other income, net for the three months ended October 28, 2023, was $7,096, compared to $18,203 for the same period in 2022, reflecting a decrease of 61.0%[20]. Assets and Liabilities - Total assets as of October 28, 2023, were $2,889,690, a slight increase from $2,879,146 as of April 29, 2023[8]. - Total liabilities increased to $1,834,601 as of October 28, 2023, compared to $1,760,611 as of April 29, 2023[8]. - Cash and cash equivalents decreased to $113,886 as of October 28, 2023, from $159,669 as of April 29, 2023[8]. - The company’s retained earnings decreased to $902,827 as of October 28, 2023, from $972,127 as of April 29, 2023[8]. - The accumulated other comprehensive loss (AOCL) increased to $(98,962) as of October 28, 2023, from $(89,262) at the end of the previous reporting period[8]. Cash Flow and Dividends - Cash flow from operating activities for the six months ended October 28, 2023, was $(485,276), compared to $(520,161) for the same period in 2022, indicating an improvement of 6.7%[16]. - The company declared dividends of $0.26 per common share for both the three and six months ended October 28, 2023[10]. - The company declared dividends totaling $50,331 for the six months ended October 28, 2023, slightly down from $50,732 in the same period of 2022[16]. - The company repurchased common stock amounting to $90,491 during the six months ended October 28, 2023, compared to $15,000 in the same period of 2022[16]. Segment Performance - Dental net sales for the three months ended October 28, 2023, were $626,381, slightly down from $628,923 million in the prior year[10]. - Animal Health net sales for the three months ended October 28, 2023, reached $1,024,622, an increase from $1,002,996 million year-over-year[10]. - Operating income for the Dental segment was $55,277 for the three months ended October 28, 2023, down from $60,950 in the prior year, a decrease of 9.0%[76]. - Consumable sales in the Animal Health segment reached $972,871 for the three months ended October 28, 2023, up from $963,767 in the same period last year, marking a growth of 0.9%[76]. - The Corporate segment reported a net sales of $1,769 for the three months ended October 28, 2023, recovering from a loss of $(5,715) in the same period last year[76]. Acquisitions and Investments - The company made an acquisition payment of $1,108 related to Miller Vet Holdings, LLC, during the first quarter of fiscal 2024[32]. - The company acquired assets from RSVP and ACT, expanding its veterinary solutions offerings[32]. - The total purchase price for recent acquisitions amounted to $37,535 million, including holdbacks of $4,255 million and working capital adjustments of $23 million[34]. - The investment in Vetsource was valued at $56,849 million as of October 28, 2023, with a put option carrying value of $25,757 million[66]. Legal and Compliance - The company is involved in various legal proceedings that may result in significant monetary damages or penalties, which could adversely affect its financial statements[79].

Effective tax rate 23.3 % Deal * May not sum due to rounding Reconciliation of GAAP to non-GAAP Measures (Unaudited) | --- | --- | --- | --- | --- | --- | --- | --- | |-----------------------------------------------------------------------|-------|-------|---------------|-------|---------------------------|-------|-------------------| | For the three months ended July 30, 2022 \nOperating income | � | | GAAP \n34,844 | S | Deal amortization \n9,351 | $ | Non-GAAP \n44,195 | | Other income (expense), net | | ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ____________________________________________________________ FORM 10-Q ____________________________________________________________ ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED July 29, 2023. Table of Contents ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No. 0-20572 _________________________________ ...

Table of Contents 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 29, 2023 OR ☐ 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) (State or other jurisdiction of incorporation o ...

PART I - FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for the quarter ended January 28, 2023, encompassing balance sheets, statements of operations, equity changes, and cash flows [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | January 28, 2023 | April 30, 2022 | | :--- | :--- | :--- | | **Total Assets** | **$2,941,991** | **$2,741,630** | | Total current assets | $1,844,714 | $1,679,022 | | Inventory | $939,098 | $785,604 | | Goodwill, net | $156,317 | $140,630 | | **Total Liabilities** | **$1,839,570** | **$1,698,995** | | Total current liabilities | $1,173,706 | $1,015,669 | | Borrowings on revolving credit | $175,000 | $29,000 | | Long-term debt | $451,910 | $488,554 | | **Total Stockholders' Equity** | **$1,102,421** | **$1,042,635** | [Condensed Consolidated Statements of Operations and Other Comprehensive Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Other%20Comprehensive%20Income) Three Months Ended Performance (in thousands, except per share data) | Metric | Jan 28, 2023 | Jan 29, 2022 | Change | | :--- | :--- | :--- | :--- | | Net sales | $1,600,850 | $1,596,596 | +0.3% | | Gross profit | $342,962 | $336,611 | +1.9% | | Operating income | $75,922 | $60,833 | +24.8% | | Net income attributable to Patterson | $53,929 | $57,006 | -5.4% | | Diluted EPS | $0.55 | $0.58 | -5.2% | Nine Months Ended Performance (in thousands, except per share data) | Metric | Jan 28, 2023 | Jan 29, 2022 | Change | | :--- | :--- | :--- | :--- | | Net sales | $4,750,319 | $4,860,633 | -2.3% | | Gross profit | $983,184 | $940,848 | +4.5% | | Operating income | $170,861 | $84,164 | +103.0% | | Net income attributable to Patterson | $132,592 | $139,332 | -4.8% | | Diluted EPS | $1.35 | $1.42 | -4.9% | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) - Total stockholders' equity increased from **$1.04 billion** at April 30, 2022, to **$1.10 billion** at January 28, 2023, driven by **$131.8 million** in net income, partially offset by **$76.4 million** in dividends and **$15.0 million** in common stock repurchases[15](index=15&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Nine Months Ended Cash Flow Summary (in thousands) | Cash Flow Activity | Jan 28, 2023 | Jan 29, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(728,197) | $(834,139) | | Net cash provided by investing activities | $667,302 | $946,419 | | Net cash provided by (used in) financing activities | $67,912 | $(90,466) | | **Net change in cash and cash equivalents** | **$5,276** | **$21,800** | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) - During Q3 FY2023, the company completed acquisitions for a total purchase price of **$37.6 million**, adding **$17.3 million** in identifiable intangibles and **$16.0 million** in goodwill to the Animal Health segment[32](index=32&type=chunk)[33](index=33&type=chunk) - The company's receivables securitization program, with a maximum availability of **$200 million**, was fully utilized as of January 28, 2023, incurring **$7.9 million** in losses for the nine months ended January 28, 2023, compared to **$2.3 million** in the prior-year period[35](index=35&type=chunk)[38](index=38&type=chunk) Segment Operating Income (in thousands) | Segment | Nine Months Ended Jan 28, 2023 | Nine Months Ended Jan 29, 2022 | | :--- | :--- | :--- | | Dental | $158,147 | $118,609 | | Animal Health | $80,372 | $73,360 | | Corporate | $(67,658) | $(107,805) | | **Total** | **$170,861** | **$84,164** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management analyzes the company's Q3 and nine-month fiscal 2023 financial performance, detailing consolidated and segment results, liquidity, and capital resources, noting sales growth and operating income improvements [Factors Affecting Our Results](index=20&type=section&id=Factors%20Affecting%20Our%20Results) - Prior year (FY2022) results were significantly impacted by non-recurring items, including an **$87.8 million** pre-tax gain on the Vetsource investment, a **$36.0 million** net expense for a legal reserve, and a **$49.2 million** charge for PPE inventory donations, which largely explains the FY2023 operating income variance[92](index=92&type=chunk)[94](index=94&type=chunk)[96](index=96&type=chunk) [Results of Operations - Quarter Ended January 28, 2023](index=22&type=section&id=Results%20of%20Operations%20-%20Quarter%20Ended%20January%2028%2C%202023) - Consolidated net sales for Q3 FY2023 increased **0.3%** to **$1.6 billion**, driven by a **2.6%** increase in Animal Health sales, which offset a **4.4%** decrease in Dental sales due to lower CAD/CAM and digital imaging equipment sales[98](index=98&type=chunk)[99](index=99&type=chunk)[100](index=100&type=chunk) - Q3 operating income rose **24.8%** to **$75.9 million**, with the operating margin improving to **4.7%** from **3.8%** year-over-year, attributed to operating expense efficiencies and improved gross margins in the Animal Health segment[102](index=102&type=chunk)[103](index=103&type=chunk) [Results of Operations - Nine Months Ended January 28, 2023](index=23&type=section&id=Results%20of%20Operations%20-%20Nine%20Months%20Ended%20January%2028%2C%202023) - For the first nine months of FY2023, consolidated net sales decreased **2.3%** to **$4.75 billion**, negatively impacted by an extra week in the prior year period and unfavorable foreign exchange rates[110](index=110&type=chunk) - Operating income for the nine-month period more than doubled to **$170.9 million** from **$84.2 million** in the prior year, primarily due to the absence of the prior year's **$49.2 million** Inventory Donation Charges and the Fiscal 2022 Legal Reserve[115](index=115&type=chunk) [Liquidity and Capital Resources](index=25&type=section&id=Liquidity%20and%20Capital%20Resources) - In Q2 FY2023, the company amended its credit agreement, securing a **$700 million** revolving credit facility and a **$300 million** term loan facility, both maturing in October 2027[126](index=126&type=chunk) - As of January 28, 2023, the company had **$175.0 million** outstanding under its revolving credit facility and **$299.3 million** outstanding under its term loan[128](index=128&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=25&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company reports no material changes in its market risk exposure since the disclosures in its 2022 Annual Report on Form 10-K - There have been no material changes in the company's exposure to market risk since the 2022 Annual Report on Form 10-K filed on June 29, 2022[131](index=131&type=chunk) [Item 4. Controls and Procedures](index=25&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, affirmed the effectiveness of disclosure controls and procedures, with no material changes to internal controls over financial reporting during the quarter - Based on an evaluation as of January 28, 2023, the CEO and CFO concluded that the company's disclosure controls and procedures were effective[132](index=132&type=chunk) - No changes occurred during the quarter ended January 28, 2023, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[133](index=133&type=chunk) PART II - OTHER INFORMATION [Item 1. Legal Proceedings](index=26&type=section&id=Item%201.%20Legal%20Proceedings) The company discloses involvement in ordinary course legal matters, accruing liabilities when probable and estimable, acknowledging inherent uncertainties - The company is involved in various lawsuits and government proceedings in the ordinary course of business and accrues for these matters when a liability is probable and the amount can be reasonably estimated[135](index=135&type=chunk) [Item 1A. Risk Factors](index=26&type=section&id=Item%201A.%20Risk%20Factors) The company reports no material changes to the risk factors previously disclosed in its Annual Report on Form 10-K for the fiscal year ended April 30, 2022 - There have been no material changes to the risk factors disclosed in the company's 2022 Annual Report on Form 10-K[136](index=136&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=26&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's stock repurchase program, noting no repurchases in Q3 FY2023 and $450 million remaining available - The company has a **$500 million** share repurchase program authorized through March 16, 2024, with **$450 million** remaining available as of January 28, 2023[137](index=137&type=chunk) - No shares were repurchased under the stock repurchase program during the third quarter of fiscal 2023[137](index=137&type=chunk) [Item 6. Exhibits](index=27&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including employment agreements and CEO/CFO certifications required by Sarbanes-Oxley Act - The report lists all exhibits filed, including CEO and CFO certifications pursuant to Sarbanes-Oxley Act Sections 302 and 906, and financial statements formatted in Inline XBRL[140](index=140&type=chunk) Signatures

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ____________________________________________________________ FORM 10-Q ____________________________________________________________ ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED July 30, 2022. ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No. 0-20572 _________________________________ ...

Patterson Companies, Inc. (NASDAQ:PDCO) Q4 2022 Earnings Conference Call June 29, 2022 8:30 AM ET Corporate Participants John Wright - Vice President, IR Mark Walchirk - President and Chief Executive Officer Don Zurbay - Chief Financial Officer Conference Call Participants Erin Wright - Morgan Stanley Jason Bednar - Piper Sandler Jeff Johnson - Baird Nathan Rich - Goldman Sachs Jon Block - Stifel Kevin Caliendo - UBS Justin Lin - William Blair Elizabeth Anderson - Evercore ISI Operator Good morning. My name ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (State or other jurisdiction of incorporation or organization) Minnesota 41-0886515 (I.R.S. Employer Identification No.) 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 30, 2022 OR ☐ 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 PATTERS ...

Financial Data and Key Metrics Changes - Consolidated reported sales for the third quarter of fiscal 2022 were $1.6 billion, an increase of 2.9% year-over-year. Internal sales increased 4.3% compared to the prior year [37] - Adjusted earnings per share for the quarter were $0.55, with year-to-date adjusted earnings per diluted share of $1.56. The adjusted EPS guidance for fiscal 2022 was raised to a range of $2.08 to $2.13 per diluted share, representing a 10% year-over-year improvement [11][12] - Gross margin for the third quarter was 21.1%, up 20 basis points year-over-year and up 130 basis points sequentially from the second quarter [39] Business Line Data and Key Metrics Changes Dental Segment - Internal sales for the Dental segment increased 0.1% year-over-year, with adjusted operating margins at 10.1%, up 70 basis points from the previous year [46][51] - Internal sales of dental consumables decreased 1.8% year-over-year, with a notable decline in infection control products by approximately 20% [46][47] - Equipment internal sales increased nearly 2% year-over-year, driven by double-digit growth in CAD/CAM and digital technology products [18] Animal Health Segment - Internal sales for the Animal Health segment increased over 8%, with Companion Animal internal sales growing 12.4% [27][52] - Adjusted operating margins in the Animal Health segment were 3.4%, an increase of 10 basis points from the prior year [53] Market Data and Key Metrics Changes - The dental market is expected to return to historical growth patterns as the pandemic subsides, with strong demand for innovation in the marketplace [23][25] - The Companion Animal market is experiencing a significant increase in pet ownership, with nearly 1 million pets adopted in the U.S. during 2021, driving higher spending on veterinary care [30][31] Company Strategy and Development Direction - The company is focused on driving margin expansion through improved product mix, particularly in private label, equipment, technology, and software [66][76] - The company aims to capitalize on positive market fundamentals and is committed to making thoughtful investments to drive growth and value creation for shareholders [61][92] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the ongoing supply chain challenges, particularly in the core equipment category, but noted strong demand for products [72] - The company remains optimistic about the momentum in its business and the ability to execute its strategy effectively [61] Other Important Information - Free cash flow for the first nine months of fiscal 2022 was $57.7 million, an increase of $49.2 million over the same period last year [55] - The company declared a quarterly cash dividend of $0.26 per diluted share, returning $25.3 million to shareholders [56] Q&A Session Summary Question: Margin progression and future upside - Management characterized the margin progression as being in the middle innings, with opportunities for continued expansion in both business units [65] Question: February exit rates and current status - Management noted a return to pre-Omicron levels and incorporated potential impacts into fourth-quarter guidance [32] Question: Supply chain challenges and quantification of impact - Management indicated ongoing supply chain challenges, particularly with core equipment, but noted strong demand and a promising backlog [73] Question: Pricing environment in Animal Health - Management confirmed that cost increases were anticipated and that they have a strong process to pass on these increases to customers [81] Question: M&A interest and evaluation of targets - Management is actively pursuing strategic investments but is focused on finding the right fit in terms of strategy, finance, and culture [91]

PART I - FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201-%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for Patterson Companies, Inc. as of January 29, 2022, including balance sheets, statements of operations, changes in stockholders' equity, cash flows, and accompanying notes. [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of January 29, 2022, total assets increased to $2.86 billion from $2.75 billion at April 24, 2021, primarily driven by a rise in inventory, while total liabilities slightly increased to $1.82 billion and total stockholders' equity grew to $1.04 billion from $964.7 million. Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | Jan 29, 2022 | April 24, 2021 | | :--- | :--- | :--- | | **Total current assets** | $1,790,431 | $1,615,929 | | Inventory | $868,728 | $736,778 | | **Total assets** | **$2,863,496** | **$2,751,511** | | **Total current liabilities** | $1,132,097 | $1,089,666 | | **Total liabilities** | **$1,819,318** | **$1,786,840** | | **Total stockholders' equity** | **$1,044,178** | **$964,671** | [Condensed Consolidated Statements of Operations and Other Comprehensive Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Other%20Comprehensive%20Income) For Q3 FY2022, net sales increased 2.9% year-over-year to $1.60 billion, with net income attributable to the company rising to $57.0 million and diluted EPS of $0.58, while nine-month net sales grew 11.7% to $4.86 billion and net income increased to $139.3 million with diluted EPS of $1.42. Q3 FY2022 Performance vs. Q3 FY2021 (in thousands, except per share amounts) | Metric | Three Months Ended Jan 29, 2022 | Three Months Ended Jan 23, 2021 | | :--- | :--- | :--- | | Net sales | $1,596,596 | $1,551,268 | | Gross profit | $336,611 | $324,541 | | Operating income | $60,833 | $61,681 | | Net income attributable to Patterson | $57,006 | $48,759 | | Diluted EPS | $0.58 | $0.50 | Nine Months FY2022 Performance vs. Nine Months FY2021 (in thousands, except per share amounts) | Metric | Nine Months Ended Jan 29, 2022 | Nine Months Ended Jan 23, 2021 | | :--- | :--- | :--- | | Net sales | $4,860,633 | $4,350,273 | | Operating income | $84,164 | $173,259 | | Net income attributable to Patterson | $139,332 | $127,226 | | Diluted EPS | $1.42 | $1.32 | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Total stockholders' equity increased from $964.7 million to $1.04 billion as of January 29, 2022, primarily driven by net income of $138.3 million, partially offset by $76.7 million in dividends declared and a foreign currency translation loss. - For the nine months ended January 29, 2022, key changes to stockholders' equity included net income of **$138.3 million**, offset by dividend declarations totaling **$76.7 million** ($25.5M + $25.6M + $25.6M) and an accumulated other comprehensive loss increase due to foreign currency translation[15](index=15&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended January 29, 2022, net cash used in operating activities was $834.1 million, largely due to changes in receivables and inventory, while net cash provided by investing activities was $946.4 million, driven by collections of deferred purchase price receivables and investment sales, and net cash used in financing activities was $90.5 million, primarily for debt repayment and dividends. Nine-Month Cash Flow Summary (in thousands) | Cash Flow Activity | Nine Months Ended Jan 29, 2022 | Nine Months Ended Jan 23, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(834,139) | $(604,884) | | Net cash provided by investing activities | $946,419 | $615,891 | | Net cash (used in) provided by financing activities | $(90,466) | $60,062 | | **Net change in cash and cash equivalents** | **$21,800** | **$78,017** | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes provide detailed explanations of the company's accounting policies and financial results, including the acquisition of Miller Vet Holdings, significant gains from investment sales, details on the receivables securitization program, segment performance data, and the settlement of a major legal proceeding. - During the first quarter of fiscal 2022, the company acquired Miller Vet Holdings, LLC, a veterinary distributor, for **$19.8 million** in cash and assumed liabilities of **$6.8 million**[34](index=34&type=chunk) - The company recognized a pre-tax gain of **$13.1 million** from the sale of a portion of its investment in Vets Plus in Q3 FY2022; this followed an aggregate pre-tax gain of **$87.8 million** related to its Vetsource investment in Q1 FY2022[65](index=65&type=chunk)[66](index=66&type=chunk)[97](index=97&type=chunk) - The company settled a federal securities class action lawsuit for **$63.0 million**; after insurance contributions of **$35.0 million** and reimbursement of **$8.0 million** in fees, the net expense recorded in operating expenses was **$28.0 million**[80](index=80&type=chunk)[99](index=99&type=chunk) Segment Net Sales (Nine Months Ended, in thousands) | Segment | Jan 29, 2022 | Jan 23, 2021 | | :--- | :--- | :--- | | Dental | $1,879,715 | $1,710,989 | | Animal Health | $2,975,031 | $2,620,677 | | Corporate | $5,887 | $18,607 | Segment Operating Income (Nine Months Ended, in thousands) | Segment | Jan 29, 2022 | Jan 23, 2021 | | :--- | :--- | :--- | | Dental | $118,609 | $172,017 | | Animal Health | $73,360 | $55,605 | | Corporate | $(107,805) | $(54,363) | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202%20-%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the financial results for the third quarter and first nine months of fiscal 2022, highlighting sales growth in both Dental and Animal Health segments, but notes that operating income was significantly impacted by one-time events, including a large legal settlement reserve, inventory donation charges, and substantial gains on investments, while liquidity remains strong. [Factors Affecting Our Results](index=22&type=section&id=Factors%20Affecting%20Our%20Results) The company's results were materially affected by significant pre-tax gains on investments totaling over $100 million, a $63 million pre-tax legal reserve for a class action settlement, and a $49.2 million charge for donating personal protective equipment, with the COVID-19 pandemic's impact becoming less significant compared to the prior year. - **Gains on Investments:** Recorded an **$87.8 million** aggregate pre-tax gain related to its Vetsource investment and a **$13.1 million** pre-tax gain from its Vets Plus investment[97](index=97&type=chunk)[98](index=98&type=chunk) - **Legal Reserve:** Recorded a **$63.0 million** pre-tax reserve for a litigation settlement, resulting in a net expense of **$36.0 million** in Q1 after accounting for probable insurance recoveries, with a further **$8.0 million** gain in Q2 from carrier reimbursement[99](index=99&type=chunk) - **Inventory Donation Charges:** Recorded a **$49.2 million** charge within cost of sales in Q1 for the planned donation of personal protective equipment[100](index=100&type=chunk) [Results of Operations](index=24&type=section&id=Results%20of%20Operations) For Q3, consolidated sales grew 2.9% to $1.6 billion, with Animal Health sales up 5.6% and Dental sales nearly flat at +0.3%, while for the nine-month period, sales rose 11.7% to $4.86 billion, but nine-month operating income fell sharply to $84.2 million from $173.3 million, primarily due to the legal reserve and inventory donation charges. - **Q3 FY2022 vs Q3 FY2021:** - Consolidated net sales increased **2.9%**[102](index=102&type=chunk) - Dental sales increased **0.3%**, with consumable sales declining due to lower infection control product sales, offset by growth in equipment[103](index=103&type=chunk) - Animal Health sales increased **5.6%**, driven by broad demand[104](index=104&type=chunk) - **Nine Months FY2022 vs Nine Months FY2021:** - Consolidated net sales increased **11.7%**[116](index=116&type=chunk) - Gross profit margin decreased **130 basis points**, primarily due to the **$49.2 million** Inventory Donation Charges[119](index=119&type=chunk) - Operating expenses increased **18.1%**, mainly due to the Fiscal 2022 Legal Reserve and higher personnel costs[120](index=120&type=chunk) - Nine-month operating income decreased to **$84.2 million** from **$173.3 million**, primarily due to the Fiscal 2022 Legal Reserve and Inventory Donation Charges[122](index=122&type=chunk) [Liquidity and Capital Resources](index=27&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity is primarily managed through operating cash flows, a receivables securitization program, and credit facilities; for the first nine months of FY2022, net cash used in operations was $834.1 million, while investing activities provided $946.4 million, largely from collecting deferred purchase price receivables, and the company retired $100.8 million in long-term debt and paid $75.7 million in dividends, with management expecting existing resources to be sufficient for the remainder of fiscal 2022. - Net cash used in operating activities of **$834.1 million** was primarily due to the impact of the Receivables Securitization Program and an increase in inventory[129](index=129&type=chunk) - Net cash provided by investing activities of **$946.4 million** was driven by **$918.4 million** in collections of DPP receivables and **$74.3 million** from the sale of investments[130](index=130&type=chunk) - As of January 29, 2022, the company had **$300.0 million** outstanding under its term loan and **$135.0 million** outstanding under its revolving credit facility[134](index=134&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=28&type=section&id=Item%203%20-%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company states that there have been no material changes in its exposure to market risk from the information disclosed in its 2021 Annual Report on Form 10-K. - There have been no material changes in the company's market risk exposure since the 2021 Annual Report on Form 10-K filed on June 23, 2021[137](index=137&type=chunk) [Item 4. Controls and Procedures](index=28&type=section&id=Item%204%20-%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of January 29, 2022, with no material changes to internal control over financial reporting occurring during the quarter. - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period, January 29, 2022[138](index=138&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[139](index=139&type=chunk) PART II - OTHER INFORMATION [Item 1. Legal Proceedings](index=29&type=section&id=Item%201%20-%20Legal%20Proceedings) This section refers to Note 11 of the financial statements for detailed information on legal matters, noting that the company is involved in various legal proceedings in the ordinary course of business and accrues for losses when they are probable and reasonably estimable. - For detailed information on legal proceedings, the report directs readers to Note 11 of the Condensed Consolidated Financial Statements[143](index=143&type=chunk) [Item 1A. Risk Factors](index=29&type=section&id=Item%201A%20-%20Risk%20Factors) The company reports that there have been no material changes to the risk factors previously disclosed in its Annual Report on Form 10-K for the fiscal year ended April 24, 2021. - There have been no material changes to the risk factors disclosed in the 2021 Annual Report on Form 10-K[144](index=144&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=29&type=section&id=Item%202%20-%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company has a $500 million share repurchase program authorized through March 16, 2024, but no shares were repurchased under this plan during the third quarter of fiscal 2022. - No shares were repurchased under the company's **$500 million** share repurchase program during the third quarter of fiscal 2022[145](index=145&type=chunk) [Item 6. Exhibits](index=30&type=section&id=Item%206%20-%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications (Sections 302 and 906 of Sarbanes-Oxley) and financial data formatted in Inline XBRL. - Lists filed exhibits, including CEO/CFO certifications and Inline XBRL data[148](index=148&type=chunk)