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.

On December 10, 2024, Patterson entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Paradigm Parent, LLC, a Delaware limited liability company (“Parent”), and Paradigm Merger Sub, Inc., a Minnesota corporation and a wholly owned subsidiary of Parent (“Merger Sub”). Parent and Merger Sub are indirect subsidiaries of funds managed and advised by Patient Square Capital, a dedicated health care investment firm. Upon the terms and subject to the conditions of the Merger Agreement, at closing (the “Effective Time”), Merger Sub will merge with and into Patterson, with Patterson continuing as the surviving corporation and as a wholly owned subsidiary of Parent (the “Merger”). At the Effective Time, by virtue of the Merger, each share of common stock of the Company issued and outstanding immediately prior to the Effective Time will be converted automatically into the right to receive $31.35 per share in cash. After the Merger, Patterson will cease to be a publicly traded company and will no longer be obligated to file periodic reports with the SEC.

The description of the Merger Agreement and the transactions contemplated thereby contained in this Quarterly Report on Form 10-Q are summaries only and are qualified in their entirety by reference to the full text of the Merger Agreement, which was included as Exhibit 2 to the Company’s Current Report on Form 8-K filed with the SEC on December 11, 2024.

The Merger is expected to close in April 2025, subject to the satisfaction of customary closing conditions, including (i) adoption and approval of the Merger Agreement, including the Merger, by holders of a majority of the Company’s shares of common stock then outstanding; (ii) consummation of the Merger not being restrained, enjoined or prohibited by any law or order of a court of competent jurisdiction or any other governmental entity; (iii) accuracy of the representations and warranties of Patterson, on the one hand, and Parent and Merger Sub, on the other hand, in the Merger Agreement, subject in some instances to materiality or “material adverse effect” qualifiers, at and as of the effective date of the Merger (except for representations and warranties that relate to a specific date or time); (iv) performance or compliance in all material respects by Patterson, on the one hand, and Parent and Merger Sub, on the other hand, of or with their respective covenants and agreements required to be performance or complied with by them under the Merger Agreement on or before the closing date of the Merger; and (v) absence of a continuing Company Material Adverse Effect (as defined in the Merger Agreement). The waiting period for the Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, has now expired. Closing of the Merger is not subject to a financing condition.

In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements contain all adjustments necessary to present fairly the financial position of Patterson Companies, Inc. (referred to herein as "Patterson" or in the first person notations "we," "our," and "us") as of January 25, 2025, and our results of operations and cash flows for the periods ended January 25, 2025 and January 27, 2024. Such adjustments are of a normal, recurring nature. The results of operations for the three and nine months ended January 25, 2025 are not necessarily indicative of the results to be expected for any other interim period or for the year ending April 26, 2025. These financial statements should be read in conjunction with the financial statements included in our 2024 Annual Report on Form 10-K filed on June 18, 2024.

The unaudited Condensed Consolidated Financial Statements include the assets and liabilities of PDC Funding Company, LLC ("PDC Funding"), PDC Funding Company II, LLC ("PDC Funding II"), PDC Funding Company III, LLC ("PDC Funding III") and PDC Funding Company IV, LLC ("PDC Funding IV"), which are our wholly owned subsidiaries and separate legal entities formed under Minnesota law. PDC Funding and PDC Funding II are fully

consolidated special purpose entities established to sell customer installment sale contracts to unaffiliated financial institutions in the normal course of their business. PDC Funding III and PDC Funding IV are fully consolidated special purpose entities established to sell certain receivables to unaffiliated financial institutions. The assets of PDC Funding, PDC Funding II, PDC Funding III and PDC Funding IV would be available first and foremost to satisfy the claims of its creditors. There are no known creditors of PDC Funding, PDC Funding II, PDC Funding III or PDC Funding IV. The unaudited Condensed Consolidated Financial Statements also include the assets and liabilities of Technology Partner Innovations, LLC, which is further described in Note 8.

We operate with a 52-53 week accounting convention with our fiscal year ending on the last Saturday in April. The third quarter of fiscal 2025 and 2024 represents the 13 weeks ended January 25, 2025 and January 27, 2024, respectively. Fiscal 2025 will include 52 weeks and fiscal 2024 included 52 weeks.


	Three Months Ended				Nine Months Ended
	January 25, 2025		January 27, 2024		January 25, 2025		January 27, 2024
Gain on investment	$	—	$	—	$	3,803	$	—
(Loss) gain on interest rate swap agreements	2,298		(3,474)		(2,181)		6,087
Investment income and other	5,849		7,127		17,944		16,563
Other income, net	$	8,147	$	3,653	$	19,566	$	22,650

Comprehensive income is computed as net income including certain other items that are recorded directly to stockholders’ equity. Significant items included in comprehensive income are foreign currency translation adjustments and the effective portion of cash flow hedges, net of tax. Foreign currency translation adjustments do not include a provision for income tax because earnings from foreign operations are considered to be indefinitely reinvested outside the U.S. The income tax expense related to cash flow hedges was $80 and $80 for the three months ended January 25, 2025 and January 27, 2024, respectively. The income tax expense related to cash flow hedges was $241 and $241 for the nine months ended January 25, 2025 and January 27, 2024, respectively.


	Three Months Ended		Nine Months Ended
	January 25, 2025	January 27, 2024	January 25, 2025	January 27, 2024
Denominator for basic EPS – weighted average shares	88,306	92,009	88,197	94,088
Effect of dilutive securities – stock options, restricted stock and stock purchase plans	764	510	674	616
Denominator for diluted EPS – weighted average shares	89,070	92,519	88,871	94,704

Potentially dilutive securities representing 942 and 997 shares for the three and nine months ended January 25, 2025 and 1,057 and 1,231 shares for the three and nine months ended January 27, 2024 were excluded from the calculation of diluted EPS because their effects were anti-dilutive using the treasury stock method.

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 product, 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 support and software services is recognized ratably over the period in which the support and services are 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.

Receivables from vendors earned as a result of volume rebates and reimbursements for customer pricing contracts and promotions are recorded as a reduction of cost of sales in the period in which the related revenue is recognized. We estimate the vendor receivables earned but not received based on sales forecasts, transactional data and historical vendor collection trends.

We offer customer financing contracts on equipment purchases by creditworthy customers. For financing contracts at a below-market interest rate, we record a subsidy as a reduction to net sales in the period the contract is originated. The subsidy on below-market rate contracts is estimated based on analyses of current publicly-available interest rate trends. We do not consider contracts with a term of one year or less to have a significant financing component and do not record a subsidy for these contracts.

We generally sell our customers’ financing contracts to unaffiliated 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 receive the proceeds of the contracts upon sale to financial institutions, with a portion of the proceeds held by the financial institutions as a deferred purchase price (DPP) as security against eventual performance of the portfolio. Customer financing net sales include the impact of changes in interest rates on DPP receivables, as the average interest rate in our contract portfolio may not fluctuate at the same rate as interest rate markets, resulting in an increase or reduction of gain on contract sales. We enter into an interest rate swap to hedge a portion of the related interest rate risk. These agreements do not qualify for hedge accounting, and the gains or losses on an interest rate swap are reported in other income and expense in our Condensed Consolidated Statements of Operation and Other Comprehensive Income.

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.

Contract balances represent amounts presented in our Condensed Consolidated Balance Sheets when either we have transferred goods or services to the customer or the customer has paid consideration to us under the contract. These contract balances include accounts receivable, contract assets and contract liabilities.

Contract asset balances as of January 25, 2025 and April 27, 2024 were $2,114 and $1,373, respectively. Our contract liabilities primarily relate to advance payments from customers, upfront payments for software and support provided over time, and options that provide a material right to customers, such as our customer loyalty programs.

At January 25, 2025 and April 27, 2024, contract liabilities of $35,472 and $37,399 were reported in other accrued liabilities, respectively. Contract liabilities are recognized as revenue when the performance obligation has been performed, which primarily occurs during the subsequent 12 months. During the nine months ended January 25, 2025, we recognized $30,928 of the amount previously deferred at April 27, 2024.

In November 2024, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2024-03, "Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses". This ASU requires new disclosures of additional disaggregation of certain expense captions into specific categories. The new standard is effective for annual disclosures in fiscal year 2028 and interim disclosures in fiscal year 2029, with early adoption permitted. We currently are evaluating the impact of adopting this pronouncement.

In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures". This ASU requires additional disclosures related to rate reconciliation and income taxes paid. The new standard is effective for annual disclosures in fiscal year 2026, with early adoption permitted. We currently are evaluating the impact of adopting this pronouncement.

In November 2023, the FASB issued ASU No. 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures". This ASU requires disclosures of significant segment expenses and other segment items. Disclosures about a reportable segment's profit or loss and assets will be required for both annual and interim periods. This ASU also requires disclosure of the title and position of Chief Operating Decision Maker ("CODM") and an explanation of how the CODM uses the reported measures of profit or loss in assessing performance and allocating resources. The new standard is effective for annual disclosures in fiscal year 2025 and interim disclosures in fiscal year 2026, with early adoption permitted. We currently are evaluating the impact of adopting this pronouncement.