DEF 14A 1 ny20000105x1_def14a.htm DEF 14A

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.  )
Filed by the Registrant ☒
Filed by a Party other than the Registrant
Check the appropriate box:
Preliminary Proxy Statement
Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material Pursuant to Section 240.14a-12
Commission File No. 0-20572
PATTERSON COMPANIES, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
No fee required.
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
 
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.
 
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PATTERSON COMPANIES, INC.
1031 MENDOTA HEIGHTS ROAD
ST. PAUL, MINNESOTA 55120
July 30, 2021
Dear Shareholder:
You are cordially invited to attend the annual meeting of shareholders of Patterson Companies, Inc. to be held virtually at 4:30 p.m., Central Daylight Saving Time, on Monday, September 13, 2021. This year’s annual meeting will be conducted as a virtual meeting of shareholders, a format that we believe provides expanded access, improved communications and cost savings to our shareholders and our company. Instructions regarding virtual attendance are set forth in the Notice below. Shareholders attending the virtual annual meeting online will be able to listen to the meeting live, submit questions and vote.
The annual meeting will be held for the following purposes: (1) to vote for the election of eight directors, (2) to vote upon an amendment to our Amended and Restated 2015 Omnibus Incentive Plan, (3) to vote upon an advisory proposal concerning our executive compensation program, and (4) to ratify the selection of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending April 30, 2022. I encourage you to vote for the nominees for director, for approval of the plan amendment, for advisory approval of our executive compensation program, and for ratification of the appointment of Ernst & Young LLP.
Whether or not you expect to attend the virtual annual meeting online, it is important that your shares be represented and voted. After reading this proxy statement, please promptly vote and submit your proxy. You may vote through the Internet, by telephone, by requesting, signing and returning a proxy card, or online during the virtual annual meeting. Your vote is important.
Very truly yours,
PATTERSON COMPANIES, INC.

Mark S. Walchirk
President and Chief Executive Officer

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PATTERSON COMPANIES, INC.
1031 MENDOTA HEIGHTS ROAD
ST. PAUL, MINNESOTA 55120
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 13, 2021
NOTICE IS HEREBY GIVEN that the annual meeting of shareholders of Patterson Companies, Inc., a Minnesota corporation, will be held virtually at 4:30 p.m., Central Daylight Saving Time, on Monday, September 13, 2021, or at any adjournment or postponement thereof. You will be able to attend the annual meeting online, listen to the meeting live, submit questions and vote by visiting www.virtualshareholdermeeting.com/PDCO2021 and entering the 16-digit control number included in our Notice Regarding the Availability of Proxy Materials or on your proxy card (if you received a printed copy of the proxy materials).
The meeting will be held for the following purposes, as more fully described in the accompanying proxy statement:
1.
To elect eight directors to have terms expiring in 2022, and until their successors shall be elected and duly qualified;
2.
To consider and vote upon a proposal to amend our Amended and Restated 2015 Omnibus Incentive Plan to increase the number of shares reserved for issuance thereunder from 11,500,000 to 19,500,000;
3.
To consider and vote upon an advisory proposal concerning our executive compensation program;
4.
To ratify the selection of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending April 30, 2022; and
5.
To consider such other business as may properly come before the meeting or any adjournment or postponement thereof.
Only shareholders of record at the close of business on July 16, 2021 are entitled to notice of, and to vote at, the virtual annual meeting. In an effort to facilitate the voting process for substantially all of our shareholders, we are using the Securities and Exchange Commission rules that allow proxy materials to be furnished to shareholders over the Internet. You can vote by proxy over the Internet by following the instructions provided in the Notice Regarding the Availability of Proxy Materials that was mailed to you on or about July 30, 2021, or, if you request printed copies of the proxy materials by mail, you can vote by mail or by telephone. You can also vote online during the virtual annual meeting. Your vote is important and your promptness in voting by proxy will assist in its expeditious and orderly processing and will assure that you are represented at the meeting. Proxies may be revoked at any time before they are exercised.
BY ORDER OF THE BOARD OF DIRECTORS

Les B. Korsh
Vice President, General Counsel and Secretary
St. Paul, Minnesota
July 30, 2021
Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be Held on
September 13, 2021
 
In accordance with rules and regulations adopted by the Securities and Exchange Commission, we are furnishing our proxy materials on the Internet. “Proxy materials” means this proxy statement, our 2021 Annual Report and any amendments or updates to these documents. Our proxy materials are available on the Internet to the general public at http://materials.proxyvote.com/703395.

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PATTERSON COMPANIES, INC.
1031 MENDOTA HEIGHTS ROAD
ST. PAUL, MINNESOTA 55120
PROXY STATEMENT FOR ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD SEPTEMBER 13, 2021
INFORMATION CONCERNING SOLICITATION AND VOTING
This proxy statement is furnished by the Board of Directors of Patterson Companies, Inc. and contains information relating to the annual meeting of shareholders to be held virtually at 4:30 p.m., Central Daylight Saving Time, on Monday, September 13, 2021.
In accordance with rules and regulations adopted by the Securities and Exchange Commission, we have elected to provide access to our proxy materials over the Internet, instead of mailing printed copies of those materials to each shareholder. Accordingly, a Notice Regarding the Availability of Proxy Materials will be mailed on or about July 30, 2021 to shareholders who owned our common stock at the close of business on July 16, 2021. Shareholders will have the ability to access the proxy materials on a website referred to in the Notice Regarding the Availability of Proxy Materials or request that a printed set of the proxy materials be sent to them by following the instructions therein.
The Notice Regarding the Availability of Proxy Materials will also provide instructions on how you can elect to receive future proxy materials electronically or in printed form by mail. If you choose to receive future proxy materials electronically, you will receive an email next year with instructions containing a link to the proxy materials and a link to the proxy voting site. Your election to receive proxy materials electronically or in printed form by mail will remain in effect until you terminate such election.
Choosing to receive future proxy materials electronically will allow us to provide you with the information you need in a timely manner, will save us the cost of printing and mailing documents to you and will conserve natural resources.
Why did I receive a notice in the mail regarding the Internet availability of the proxy materials this year instead of a paper copy of the proxy materials?
The Securities and Exchange Commission rules allow companies to furnish their proxy materials over the Internet. As a result, we are mailing to most of our shareholders a Notice Regarding the Availability of Proxy Materials instead of a paper copy of the proxy materials. All shareholders receiving the notice will have the ability to access the proxy materials over the Internet and request to receive a paper copy of the proxy materials by mail. Instructions on how to access the proxy materials over the Internet or to request a paper copy may be found on the notice. In addition, the notice contains instructions on how shareholders may request to receive proxy materials in printed form by mail or electronically by e-mail on an ongoing basis.
How can I access the proxy materials over the Internet?
The Notice Regarding the Availability of Proxy Materials, proxy card or voting instruction card provided by your broker, trustee or nominee, will contain instructions on how to view our proxy materials for the annual meeting of shareholders on the Internet and how to instruct us to send our future proxy materials to you electronically by e-mail.

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How may I obtain a paper copy of the proxy materials?
Shareholders receiving a Notice Regarding the Availability of Proxy Materials will find instructions about how to obtain a paper copy of the proxy materials on their notice.
What is the purpose of the virtual annual meeting?
At our virtual annual meeting, shareholders will vote on the following items of business:
The election of eight directors to have terms expiring in 2022, and until their successors shall be elected and duly qualified;
Approval of an amendment to our Amended and Restated 2015 Omnibus Incentive Plan to increase the number of shares reserved for issuance thereunder from 11,500,000 to 19,500,000;
Advisory approval of our executive compensation program; and
Ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending April 30, 2022.
Shareholders will also vote on such other matters as may properly come before the meeting or any adjournment or postponement thereof.
What are the Board’s recommendations?
Our Board of Directors recommends that you vote:
FOR election of each of the nominees for director (see Proposal No. 1);
FOR approval of the amendment to our Amended and Restated 2015 Omnibus Incentive Plan (See Proposal No. 2);
FOR advisory approval of our executive compensation program (see Proposal No. 3); and
FOR ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending April 30, 2022 (see Proposal No. 4).
With respect to any other matter that properly comes before the meeting, the proxy holders will vote as recommended by our Board of Directors or, if no recommendation is given, in their own discretion.
What shares are entitled to vote?
As of July 16, 2021, the record date for the meeting, we had 97,229,896 shares of common stock outstanding and approximately 1,700 shareholders of record. Each share of our common stock outstanding on the record date is entitled to one vote on each item being voted on at the meeting. You can vote all the shares that you owned on the record date. These shares include (1) shares held directly in your name as the shareholder of record, and (2) shares held for you as the beneficial owner through a broker, bank or other nominee. Shareholders do not have the right to cumulate votes in the election of directors. Shares are counted as present if either the shareholder votes online at the virtual annual meeting, or has properly submitted a proxy by Internet, by telephone, or by mail.
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How can I vote by proxy in advance of the virtual annual meeting?
Whether you hold shares directly as the shareholder of record or through a broker, trustee or other nominee as the beneficial owner, you may direct how your shares are voted without attending the virtual annual meeting. There are three ways to vote by proxy:
By Internet – Shareholders who receive a Notice Regarding the Availability of Proxy Materials may submit proxies over the Internet by following the instructions on the notice. Shareholders who receive a paper copy of a proxy card or voting instruction card provided by their broker, trustee or nominee by mail may submit proxies over the Internet by following the instructions on the proxy card or voting instruction card.
By Telephone – Shareholders of record may submit proxies by telephone by following the instructions set forth on the website listed on the Notice Regarding the Availability of Proxy Materials or the proxy card. You will need to have the control number that appears on your Notice Regarding the Availability of Proxy Materials or proxy card available when voting by telephone.
By Mail – Shareholders who request and receive a paper copy of the proxy card or the voting instruction card by mail may submit proxies by completing, signing and dating their proxy card or voting instruction card and mailing it in the accompanying pre-addressed envelope.
How do I vote my Patterson Companies, Inc. Employee Stock Ownership Plan and Trust (“ESOP”) or Patterson Dental Canada, Inc. Deferred Profit Sharing Plan (“DPSP”) shares?
If you participate in the ESOP or the DPSP, follow the directions on your proxy card to vote shares held for you in your ESOP or DPSP account, and such shares will be voted in accordance with your instructions. If you do not provide instructions on or before Wednesday, September 8, 2021, our Board of Directors will direct Delaware Charter Guarantee & Trust Company dba Principal Trust Company, the trustee of the ESOP, to vote your ESOP shares in accordance with the Board’s recommendations. If you do not provide instructions on or before Wednesday, September 8, 2021, our Board will direct Standard Life Trust Company, the trustee of the DPSP, to vote your DPSP shares in accordance with the Board’s recommendations.
Who can attend the virtual annual meeting?
All shareholders as of the record date, or their duly appointed proxies, may attend and participate in the virtual annual meeting by accessing www.virtualshareholdermeeting.com/PDCO2021. To join the annual meeting, you will need to have your 16-digit control number, which is included on your Notice Regarding the Availability of Proxy Materials or on your proxy card (if you received a printed copy of the proxy materials). In the event that you do not have a control number, please contact your broker, bank, or other nominee as soon as possible and no later than Wednesday, September 8, 2021, so that you can be provided with a control number and gain access to the meeting. Shareholders may vote electronically and submit questions online while attending the virtual annual meeting.
The live audio webcast of the annual meeting will begin promptly at 4:30 p.m., Central Daylight Saving Time. Online access to the audio webcast will open approximately 15 minutes prior to the start of the annual meeting to allow time for you to log in and test the computer audio system. We encourage our shareholders to access the meeting prior to the start time. If you encounter any difficulties accessing the virtual annual meeting during the check-in or meeting time, please call the technical support number that will be posted on the online annual meeting login page at www.virtualshareholdermeeting.com/PDCO2021.
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How can I vote my shares at the virtual annual meeting?
To vote your shares online at the virtual annual meeting, please visit www.virtualshareholdermeeting.com/PDCO2021 and enter the 16-digit control number included in our Notice Regarding the Availability of Proxy Materials or on your proxy card (if you received a printed copy of the proxy materials).
Even if you plan to attend the virtual annual meeting online, we recommend that you vote by proxy in advance of the annual meeting as described above so that your vote will be counted if you later decide not to attend the annual meeting. For additional information, please see “How can I vote by proxy in advance of the virtual annual meeting?” above.
To vote your shares without attending the virtual annual meeting, please follow the instructions for Internet or telephone voting contained in the Notice Regarding the Availability of Proxy Materials. Whether you hold shares directly as a shareholder of record or beneficially in street name, you may direct how your shares are voted without attending the virtual annual meeting online. If you are a shareholder of record, you may vote by submitting a proxy electronically via the Internet, by telephone, or if you have requested a paper copy of these proxy materials, by returning the proxy card or voting instruction card. If you hold shares beneficially in street name, you may vote by submitting voting instructions to your broker, trustee or nominee. All shares represented by a valid proxy received prior to the annual meeting will be voted.
Can I change my vote or revoke my proxy after I submit my vote?
Yes. If you vote prior to the meeting, you may change your vote or revoke your proxy at any time before the votes are cast at the meeting. You may automatically revoke your proxy by attending the virtual annual meeting online and voting online at the meeting. Attending the virtual annual meeting online without voting at such meeting will not in and of itself constitute revocation of a proxy. To revoke your voting instructions, you may submit new voting instructions to your broker, trustee or nominee. Another means to revoke your proxy or change your proxy or voting instructions is to send a written notice via email to investor.relations@pattersoncompanies.com before the beginning of the annual meeting.
What constitutes a quorum?
The presence at the virtual annual meeting, in person or by proxy, of the holders of at least a majority of the shares of our common stock outstanding as of the record date will constitute a quorum. There must be a quorum for any action to be taken at the meeting (other than an adjournment or postponement of the meeting). If you submit a properly executed proxy card, even if you abstain from voting, then your shares will be counted for purposes of determining the presence of a quorum. Because brokers cannot vote shares on their customers’ behalf on “non-routine” proposals, such as Proposal Nos. 1, 2, and 3 in this proxy statement, without receiving voting instructions from a customer, if a broker does not receive voting instructions from its customer concerning a non-routine proposal and is precluded from voting on that proposal, then a “broker non-vote” occurs. If a broker returns a proxy indicating a lack of authority to vote on non-routine proposals, the shares represented by the proxy will be deemed present at the meeting for purposes of determining a quorum, but not present for purposes of calculating the vote on such proposals.
What vote is required to approve each item?
Proposal No. 1. Assuming the presence of a quorum, election as a director requires the affirmative vote of the holders of a majority of the shares represented in person or by proxy and entitled to vote at the meeting. For additional information, please see “How does the director resignation policy work?” below.
Proposal Nos. 2, 3 and 4. Assuming the presence of a quorum, the affirmative vote of the greater of (1) a majority of the outstanding shares of our common stock present in person or by proxy and entitled to vote on the item at the meeting and (2) a majority of the minimum number of shares entitled to vote that would constitute a quorum for the transaction of business at the meeting, will be required for approval of each of these proposals.
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What is the effect of an abstention or broker non-vote on each proposal?
With respect to the election of directors, the proposal to amend the Amended and Restated 2015 Omnibus Incentive Plan, the advisory proposal on executive compensation, and the proposal to ratify the selection of Ernst & Young LLP:
If you abstain from voting on a nominee or a proposal, your shares will be considered present at the annual meeting for purposes of determining a quorum and for purposes of calculating the shares present and entitled to vote on the nominee or the proposal and, accordingly, will have the same effect as a vote against the nominee or proposal.
If you do not vote (or a broker non-vote occurs) on a nominee or a proposal, your shares will not be deemed present for the purposes of calculating the vote on that nominee or proposal and will generally have no impact on determining whether the nominee is elected or the proposal is approved.
What does it mean if I receive more than one proxy card?
If you receive more than one proxy card, it means that you hold shares registered in more than one name or brokerage account. You should sign and return each proxy card that you receive in order to ensure that all of your shares are voted.
How can I vote on each of the proposals?
With respect to the first proposal, you may vote FOR or AGAINST each nominee, or you may indicate that you wish to ABSTAIN from voting on one or more nominees. With respect to each of the second, third and fourth proposals, you may vote FOR or AGAINST the proposal, or you may indicate that you wish to ABSTAIN from voting on the proposal.
If you vote by proxy, your shares will be voted at the annual meeting in the manner you indicate on your proxy. If you sign a paper proxy card but do not specify how you want your shares to be voted (and you do not hold your shares through a broker, bank or other financial institution), they will be voted (1) FOR election of the nominees named below under the caption “Proposal No. 1 – Election of Directors;” (2) FOR approval of the amendment to our Amended and Restated 2015 Omnibus Incentive Plan; (3) FOR advisory approval of our executive compensation program; (4) FOR ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending April 30, 2022; and (5) in the discretion of the proxies named on the proxy card with respect to all other appropriate matters properly brought before the annual meeting.
How does the director resignation policy work?
Pursuant to our Corporate Governance Guidelines, any nominee for director in an uncontested election (i.e., an election where the number of nominees is not greater than the number of directors to be elected) who fails to receive the affirmative vote of the holders of a majority of shares represented in person or by proxy and entitled to vote at the meeting shall, promptly following certification of the shareholder vote, offer his or her resignation to our Governance and Nominating Committee. The resignation offer shall be in writing and shall be an irrevocable resignation offer pending acceptance or rejection by our Board of Directors following its receipt of the recommendation of our Governance and Nominating Committee. We will promptly disclose to the public each such resignation and decision by our Board.
Who will count the proxy votes?
All votes will be tabulated by Broadridge Financial Services as the inspector of election for the meeting. Such firm will separately tabulate affirmative and negative votes, abstentions and broker non-votes.
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How will voting on any other business be conducted?
We do not expect any matters to be presented for a vote at the meeting other than the matters described in this proxy statement. If you grant a proxy, either of the proxy holders, Mark S. Walchirk or Les B. Korsh, or his nominee(s) or substitute(s), will have the discretion to vote your shares on any additional matters that are properly presented for a vote at the meeting. If a nominee is not available as a candidate for director, the persons named as proxy holders may vote your proxy for another candidate nominated by our Board of Directors.
Who is paying for this proxy solicitation?
We will pay the expenses incurred in connection with the solicitation of proxies. We are soliciting proxies principally by mail. In addition, our directors, officers and other employees may solicit proxies personally, by telephone, by facsimile or by e-mail, for which they will receive no consideration other than their regular compensation. We will also request brokerage houses, nominees, custodians and fiduciaries to forward soliciting material to the beneficial owners of shares held as of the record date and will reimburse such persons for their reasonable expenses so incurred.
Why are you not holding the annual meeting in a physical location?
We successfully held our annual meeting virtually for the first time in 2020 and we have made the decision to hold the annual meeting virtually again in 2021. We believe that holding the annual meeting virtually allows us to expand shareholder access, improve communications and reduce costs for our shareholders and our company.
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PROPOSAL NO. 1
ELECTION OF DIRECTORS
Eight persons have been nominated for election as directors at the annual meeting, all of whom currently serve as directors. Our directors are elected annually, by a majority of the shares represented in person or by proxy and entitled to vote at the meeting, to serve until the next annual meeting of shareholders and until their respective successors are elected and duly qualified. There are no family relationships between or among any of our directors or executive officers.
Our Bylaws provide for a Board of Directors consisting of one or more members, and further provide that the shareholders at each annual meeting shall determine the number of directors. The Board recommends that the number of directors be set at eight and it is intended that the proxies accompanying this proxy statement will be voted at the annual meeting to establish a Board consisting of eight members.
It is intended that votes will be cast pursuant to the enclosed proxy for the election of the nominees, except for those proxies that vote against the nominees or abstain from voting on the nominees. As noted above, shareholders do not have cumulative voting rights with respect to the election of directors, and proxies cannot be voted for a greater number of directors than the number of nominees. If any nominee shall be unable or unwilling to serve as a director, it is intended that the proxy will be voted for the election of such other person as the proxies shall, in their discretion, determine. We have no reason to believe that any nominee will not be a candidate or will be unable to serve.
Set forth below is certain information concerning the nominees for election:
Name
Age
Principal Occupation
Position(s) with Patterson
Director Since
John D. Buck
71
Chief Executive Officer of Whitefish Ventures, LLC
Chairman of the Board
2006
Alex N. Blanco
60
Former Executive Vice President and Chief Supply Chain Officer of Ecolab Inc.
Director
2017
Jody H. Feragen
65
Former Executive Vice President and Chief Financial Officer of Hormel Foods Corporation
Director
2011
Robert C. Frenzel
50
President and Chief Operating Officer of Xcel Energy Inc.
Director
2018
Francis J. Malecha
57
Manager of Hidden Lake Vineyard, LLC
Director
2018
Ellen A. Rudnick
70
Senior Advisor on Entrepreneurship, University of Chicago Booth School of Business
Director
2003
Neil A. Schrimsher
57
President and Chief Executive Officer of Applied Industrial Technologies, Inc.
Director
2014
Mark S. Walchirk
55
President and Chief Executive Officer of Patterson Companies, Inc.
President, Chief Executive Officer, Director
2017
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Nominees for Election as Director
John D. Buck serves as our non-executive Chairman of the Board. Mr. Buck is the principal owner of Whitefish Ventures, LLC, a family investment fund. He has been its Chief Executive Officer since 2000. Mr. Buck was Chief Executive Officer of Medica, the second largest health benefits plan in Minnesota, from February 2002 to May 2003. From 1996 to 2000, he worked for Fingerhut Companies, Inc. with his last assignment as President and Chief Operating Officer, and played an integral role in developing the business services area of the company. Prior to Fingerhut, Mr. Buck was Vice President of Administration at Alliant Techsystems, a leading supplier of aerospace and defense technologies. Prior to that, Mr. Buck spent 21 years at Honeywell, Inc., including a four-year international posting, and most recently serving as Vice President of Administration. Mr. Buck is Chairman of the Board of Directors of Medica, served as a director of Evine Live, Inc. from 2004 to 2015, and became a director of Round River Research in 2017. He has been one of our directors since December 2006. Mr. Buck brings financial, strategic and leadership experience, including health benefit plan experience, to our Board.
Alex N. Blanco served as Senior Vice President and Chief Supply Chain Officer for Baxter International, a leading provider of products to treat hemophilia, kidney disease, immune disorders and other chronic and acute medical conditions, from March 2020 to June 2020. From January 2013 to March 2020, Mr. Blanco served as Executive Vice President and Chief Supply Chain Officer for Ecolab Inc., a global leader in water, hygiene and energy technologies and services that protect people and vital resources. From 1982 to 2012, Mr. Blanco held senior management positions at Procter & Gamble Co. (“P&G”), with his last position as Vice President Product Supply Global Beauty Sector. In his previous roles, he led the supply chain in other key P&G divisions and also had international assignments, in which Mr. Blanco was based outside of the United States from 1990 to 2004, having spent ten years in South America and four years in Europe, and during which time he had responsibility for Central and Eastern Europe, the Middle East and Africa. He served as director of YMCA of the Greater Twin Cities from June 2015 to May 2020. He has been one of our directors since April 2017. Mr. Blanco brings extensive supply chain and international experience to our Board.
Jody H. Feragen served as Executive Vice President and Chief Financial Officer of Hormel Foods Corporation, a multinational marketer and manufacturer of brand name food and meat products, from November 2010 to October 2016. Ms. Feragen served as Hormel’s Senior Vice President and Chief Financial Officer from January 2007 to October 2010 and Hormel’s Vice President (Finance) and Treasurer from October 2005 to December 2006. She also served on Hormel’s board of directors from 2007 to 2016. Since September 2015, Ms. Feragen has served as a director, including current service as chair of the audit committee and a member of the nomination and governance committee, of Graco Inc., a supplier of technology and expertise for the management of fluids in both industrial and commercial applications. She has been one of our directors since September 2011. Ms. Feragen brings extensive experience in public company financial management to our Board.
Robert C. Frenzel has been selected to serve as President and Chief Executive Officer of Xcel Energy, Inc. (“Xcel Energy”) effective August 18, 2021, and currently serves as President and Chief Operating Officer of Xcel Energy, a position he has held since March 2020, where he has responsibility for Xcel Energy’s four utility operating companies, along with the transmission, distribution and natural gas businesses. From May 2016 to March 2020, Mr. Frenzel served as Executive Vice President and Chief Financial Officer of Xcel Energy. From February 2012 to April 2016, Mr. Frenzel served as Senior Vice President and Chief Financial Officer of Luminant, a subsidiary of Energy Future Holdings Corp. (“EFHC”). From February 2009 to February 2012, he served as Senior Vice President for Corporate Development, Strategy and Mergers and Acquisitions for EFHC. In April 2014, EFHC, the majority of its subsidiaries, including Texas Competitive Energy Holdings (“TCEH”), the parent company of Luminant, filed a voluntary bankruptcy petition under Chapter 11 of the United States Bankruptcy Code. TCEH emerged from Chapter 11 in October 2016. Earlier in his career, Mr. Frenzel advised corporate clients on strategic and financial transactions as a Vice President in the Investment Banking Division at Goldman Sachs, and consulted in the strategy, finance, and economics practice at Arthur Andersen. Mr. Frenzel also served in the United States Navy for six years as a nuclear engineering officer and weapons officer, and was promoted to lieutenant commander in the Navy Reserve following active duty. He has been one of our directors since March 2018. Mr. Frenzel brings public company executive management, supply chain, strategic merger and acquisition, system implementation and risk management experience to our Board.
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Francis J. Malecha has served as Manager of Hidden Lake Vineyard, LLC since March 2020. He previously served as President, Chief Executive Officer and a director of Compass Minerals International, Inc., a leading provider of essential minerals, from January 2013 to November 2018. Previously, Mr. Malecha was Head of Agricultural Products, North America at Glencore International plc. From 2000 to 2013, Mr. Malecha held a series of increasingly senior roles at global agribusiness company Viterra, Inc, culminating in his tenure Chief Operating Officer of the company’s grain division before Viterra was acquired by Glencore. Earlier in his career, Mr. Malecha spent 15 years in the grain division of General Mills, Inc. He has been one of our directors since June 2018. Mr. Malecha brings merchandising, transportation, operations, risk management and international merger and acquisition experience to our Board.
Ellen A. Rudnick has served as Senior Advisor on Entrepreneurship at the University of Chicago Booth School of Business since July 2016. Ms. Rudnick was previously the Executive Director and Clinical Professor of the Polsky Center for Entrepreneurship and Innovation at the University of Chicago Booth School of Business since March 1999. She served as Chairman of Pacific Biometrics, a medical diagnostics company which she co-founded, from 1993 to 1999; President of HCIA and CEO of Healthcare Knowledge Resources, both healthcare information service companies, from 1990 to 1992; and in a variety of capacities at Baxter Healthcare from 1975 to 1990, including Corporate Vice President of Baxter Healthcare and President and Founder of Baxter Management Services Division. Ms. Rudnick served as Founder and Chairman of CEO Advisors, a consulting firm established in 1992. Ms. Rudnick served as director of HMS Holdings Corp. from 1997 to March 2021, and she currently serves as director of First Midwest Bancorp, Inc. and Liberty Mutual Insurance Company. She has been one of our directors since December 2003. Ms. Rudnick brings experience with small businesses (our customer base), the medical products industry, academia and entrepreneurship to our Board.
Neil A. Schrimsher has served as Chief Executive Officer of Applied Industrial Technologies, Inc., a leading value-added distributor and technical solutions provider of industrial motion, fluid power, flow control, automation technologies, and related maintenance supplies, since October 2011 and was also elected its President in August 2013. From January 2010 to August 2011, Mr. Schrimsher was Executive Vice President of Cooper Industries, a global electrical products manufacturer, where he led multiple businesses in Cooper’s Electrical Products Group and headed numerous domestic and international growth initiatives. Mr. Schrimsher joined Cooper Industries in May 2006 as the President of Cooper Lighting. Mr. Schrimsher’s other experience includes senior leadership positions for Siemens Energy & Automation, part of Siemens AG, the global electronics and electrical engineering company. He began his career at General Electric Company and rose through a succession of positions in GE Lighting. He has served as a director of Applied Industrial Technologies, Inc. since October 2011. He has been one of our directors since March 2014. Mr. Schrimsher brings wholesale distribution and executive leadership experience to our Board.
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 became one of our directors in November 2017. Mr. Walchirk brings strategic and leadership experience, including healthcare services and distribution experience, to our Board.
Experience and Attributes of Director Nominees
Our Board of Directors has identified key skills and attributes that are important for effective governance of Patterson. Each director brings to us a wealth of experience that combines to varying degrees many or all of these skills, but some have more in-depth experience in a particular area than others. Consistent with the goal of ensuring a comprehensive mix of skills and attributes are represented, below we capture how the director nominees contribute to both the general skills mix (organized by key attribute), as well as more specialized skills relevant to that attribute. In making this assessment, we considered the experience each director has from work, education, board service on other public companies and engagement in community, civic and business organizations.
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Summary of Director Qualifications and Experience
John Buck
Alex Blanco
Jody Feragen
Robert Frenzel
Francis Malecha
Ellen Rudnick
Neil Schrimsher
Mark Walchirk
Large Company Experience as Executive or Board Member is important because of the complex and unique management requirements for a large, public company.
X
X
X
X
X
X
X
X
Extensive Knowledge of Patterson History allows our Board of Directors to learn from our history and what works for our company.
X
X
X
X
Healthcare Industry Experience facilitates relevant, efficient, and effective discourse relating to our business and strategy.
X
X
X
International Business Experience is important because of our global reach and the growing interconnectivity of people and industry.
X
X
X
X
X
Financial Literacy is necessary to understand our financial reports, internal controls, and the complex transactions we conduct regularly.
X
X
X
X
X
X
X
X
Public Company Governance Experience assists directors with diligent management of accountability, transparency and protection of shareholder interests.
X
X
X
X
X
X
X
X
Experience in Marketing and Sales is crucial in understanding how to most effectively sell our products in existing markets and to expand to new ones.
X
X
X
Operations Experience helps in understanding the balance between efficiency and the highest level of quality controls.
X
X
X
X
X
X
X
Experience in Human Resources, Culture and Compensation allows directors to help us hire, motivate, and retain the best employees.
X
X
X
X
X
X
Understanding and Previous Work with Technology Solutions will allow our company to innovate and thrive in a world that relies more heavily than ever on interconnectivity of systems and tech.
X
X
X
Experience in Capital Allocation and Deployment allows directors to decide on the proper placement of assets and funds, manage risks, and invest smartly in upcoming and lucrative avenues.
X
X
X
X
X
X
X
X
Business Development Experience (including M&A) is important because of the board’s role in strategic planning of mergers, acquisitions, and divestitures.
X
X
X
X
X
X
X
X
Regulatory Experience allows our directors to provide oversight of our regulated activities and risk management.
X
X
X
X
X
X
Enterprise Risk Management, including business continuity and cyber security, allows our company to thrive in a rapid-paced market.
X
X
X
X
X
X
X
X
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Diversity of Director Nominees
Our director nominees represent a diverse range of experience and backgrounds, and come together to govern Patterson as an effective whole. The Governance and Nominating Committee focuses on recruiting and recommending diverse candidates to complement current director demographics. Self-identified gender and demographic background data for our current directors appears in the charts below.

Vote Required
Election as a director requires the affirmative vote of the holders of a majority of the shares represented in person or by proxy and entitled to vote at the meeting. Our Board of Directors recommends that you vote FOR the election of the nominees listed above.
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OUR BOARD OF DIRECTORS AND COMMITTEES
Overview
Our Board of Directors represents the interests of our shareholders as a whole and is responsible for directing the management of the business and affairs of our company, as provided by Minnesota law. Our Board held 11 meetings and took action by written consent 3 times during fiscal 2021. In addition to meetings of the full Board, directors also attended committee meetings. Each director attended at least 75% of all of the meetings of the Board and of those committees on which he or she served.
Our Board is comprised of a majority of independent directors as defined in Rule 5605(a)(2) of the Marketplace Rules of the NASDAQ Stock Market. Our Board has affirmatively determined the independence under the applicable Marketplace Rule as to each of our directors who are identified as independent directors in the chart that appears below within the subsection captioned “Committee Overview.”
The independent members of our Board meet in executive session at each regular meeting of our Board, with no members of management present.
Our company and our Board are members of the National Association of Corporate Directors (“NACD”). Our Board authorizes, recommends and encourages each Board member and our company’s senior management to attend educational courses offered by the NACD or similar accredited educational organization. We reimburse reasonable expenses incurred by our directors and senior management in attending such courses.
Code of Conduct and Corporate Governance Guidelines
Our company has 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 Rule 5610 of the NASDAQ Marketplace Rules. Our Code of Conduct is available on our website at www.pattersoncompanies.com or in print upon written request to Patterson Companies, Inc., 1031 Mendota Heights Road, St. Paul, Minnesota 55120, Attention: Investor Relations. 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 www.pattersoncompanies.com.
Our company also has adopted and published Corporate Governance Guidelines. Our Corporate Governance Guidelines address various governance topics, including:
The role of our Board of Directors,
The composition of our Board and selection of directors,
Functioning of our Board and its committees,
Compensation of directors, and
Conduct and ethics standards for directors.
Our Corporate Governance Guidelines are available on our website at www.pattersoncompanies.com or in print upon written request to Patterson Companies, Inc., 1031 Mendota Heights Road, St. Paul, MN 55120, Attention: Investor Relations.
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Leadership Structure and Risk Oversight
Our Board of Directors, which elects its Chairman annually by a majority vote, does not have a fixed policy regarding whether the same person should serve as both the Chief Executive Officer and Chairman of the Board, and our Board believes that flexibility on this point best serves our company by allowing us to employ a leadership structure that is most appropriate under the circumstances at any given time.
We currently believe that bifurcating the roles of Chief Executive Officer and Chairman of the Board, as well as the oversight exercised by the independent members of our Board through the work of the committees of our Board discussed below, enables strong and dynamic Board leadership, and effectively allocates authority, responsibility and oversight between management and the independent members of our Board. Our Board has the discretion to combine the roles of Chief Executive Officer and Chairman of the Board in the future if it deems it advisable and in the best interest of our company to do so.
The separation of the Chairman and Chief Executive Officer positions allows our Chairman to focus on governance of our Board, Board meeting agenda planning, Board committee succession planning, the recruitment of new directors, Board committee responsibilities, and other governance matters as further described below under the caption “Role of Non-Executive Chairman,” and our Chief Executive Officer to focus his attention on our business and execution of our company’s strategy. The Chairman also has an important role in the performance evaluation of the Chief Executive Officer, which helps the Governance and Nominating Committee evaluate the most effective Board leadership structure for our company. Our Board believes that these and other activities of the Chairman serve to enhance the independent leadership of the Board in order to provide robust oversight and promote overall Board effectiveness. Mr. Buck has an extensive leadership background, is actively engaged as Chairman on Board matters, and works closely with Mr. Walchirk. Mr. Buck frequently interacts with Mr. Walchirk and other members of management to provide his perspective on important issues facing our company and the informational needs of our Board. In addition to the Governance and Nominating Committee, which he chairs, and the Compliance Committee, where he currently serves as a member, Mr. Buck routinely attends the meetings of our Board’s other committees and frequently communicates with the chairs of those committees and with other independent directors both inside and outside of our Board’s normal meeting schedule to discuss Board and company issues as they arise. In addition, our Board has a significant majority of independent directors and all Board committees are comprised of independent directors.
Risk oversight is provided by a combination of our full Board and its committees. As part of its oversight, our Board meets regularly to discuss the strategic direction and the issues and opportunities facing our company, including the COVID-19 pandemic. Specifically regarding COVID-19, our Board has been actively overseeing our company’s response, including receiving regular updates from and having discussions with senior management. The Board’s review and discussions around the pandemic span a broad range of matters, including protecting the health and safety of our employees, supporting our employees, evaluating the impact of the pandemic on strategy, operations, liquidity and financial matters, interruptions in the industries in which our products are used (including the closure of dental practices, veterinary practices and meat production facilities), limited supply of personal protective equipment needed by dental practices, minimizing supply chain disruption, interruptions in the financial markets, and monitoring continued compliance with applicable laws. In addition to COVID-19 specific risk management, the Board and its committees oversee the most critical risks relating to our business, which include general business and industry risks, operating risks, business continuity risks, cyber-security risks, financial risks including infrastructure, talent management and human capital related risks and compliance and regulatory risks. While the Board oversees risk, senior management is charged with identifying, assessing and managing risk. Risk management is not allocated to a single risk management officer, but rather is administered by management in an approach that is designed to ensure that the most significant risks are managed and monitored appropriately. Our senior management has a commitment to employing and imbedding risk management practices and disciplines into its business planning and management processes to better enable achievement of our financial and compliance objectives as well as to achieve and maintain a competitive advantage in the marketplace.
Throughout the year, our Board provides guidance to senior management regarding strategy and critically reviews operating plans that are intended to implement that strategy. Our Board periodically holds meetings with senior management dedicated to discussing and reviewing operating plans and overall corporate strategy. A discussion of key risks to the plans and strategy as well as risk mitigation plans and activities is conducted during that meeting. The
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involvement of our Board in setting business strategy is critical to the determination of the types and appropriate levels of risk undertaken by our company. Our Board’s oversight includes its receipt and review of reports on data protection and cybersecurity matters from our information technology department. Also, more particularly, and as discussed below, our Audit Committee focuses on oversight of financial risks relating to our company; our Compensation Committee focuses primarily on risks relating to remuneration of officers and other employees; our Governance and Nominating Committee focuses on reputational and corporate governance risks relating to our company; our Finance and Corporate Development Committee, which was recently dissolved and the duties of which were substantially integrated into the Audit Committee’s responsibilities, focused on risks associated with our capital structure, capital budget, capital expenditures, issuance and repurchase of securities, acquisitions and divestitures, and corporate investment and treasury policy; and our Compliance Committee focuses on oversight of matters related to the company’s compliance with applicable laws and regulations.
Environment, Social and Governance
We focus on corporate responsibility as an employer, industry participant and distributor of dental and animal health goods and services. We strive to improve the impact of our operations on the environment, promote diversity and inclusion, and provide resources and opportunities to our team members and communities. Key environmental, social and governance developments during fiscal 2021 included:
Supporting the efforts of Paterson UNITES, a volunteer group of Patterson team members focused on building and executing our diversity and inclusion strategy, including among other things the UNITES LGBTQA+ Affinity Group;
Developing and executing a mentorship initiative designed to advance the growth and development of women throughout the organization through participation in peer-mentoring circles as well as one-on-one mentoring;
Partnering with WILMAH, Women in Leadership and Management in Animal Health, an organization that mirrors our dedication to the well-being of all animals and provides opportunities to help women achieve success at every stage of their careers;
Supporting the Patterson Foundation scholarship program, which provides annual renewable scholarships to dependents of Patterson employees, and continued donations to dental and animal health nonprofit organizations;
Improving and promoting environmental health and safety initiatives;
Focusing on sustainability efforts at our corporate headquarters, in our fleet program, and through operational management by reducing waste, minimizing our carbon footprint, recycling materials, and managing shipping efficiencies; and
Delegating for the first time oversight of our environmental, social and governance efforts to our Governance and Nominating Committee.
In 2021, we published our 2020 Corporate Responsibility Report, which can be found on our website at https://s25.q4cdn.com/552046950/files/doc_downloads/footer/2021/PDCO_CorpResponsibilityReport_2020.pdf and which we intend to update periodically as we continue to progress our environmental, social and governance objectives and outcomes. Additionally, the Board oversaw the refreshment of the Company’s Code of Conduct to reinforce our company’s and our employees’ roles in compliance, and efforts to increase stakeholder engagement.
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Role of Non-Executive Chairman
The role of non-executive Chairman is designed to provide leadership to our Board and to provide support and advice to our Chief Executive Officer. The role is intended to foster an environment conducive to effective communication by and among our Directors and senior management. The non-executive Chairman performs such duties and responsibilities as our Board may determine appropriate, including the following:
Calling meetings of the Board and meetings of our independent directors;
Presiding over Board meetings, including executive sessions of our independent directors;
Briefing the Chief Executive Officer on issues and concerns arising in the executive sessions of the Board;
Being available, when requested and appropriate, for consultation and direct communication with shareholders;
Reviewing and approving all information sent to our Board, including the quality, quantity, appropriateness and timeliness of such information;
Establishing meeting agendas for our Board in consultation with members of senior management;
Reviewing and approving the scheduling of Board meetings, assuring there is sufficient time for discussion of all agenda items;
Coordinating Board input and review of management’s strategic plan for the company;
Working with the Governance and Nominating Committee with respect to the recruitment, selection and orientation of new Board members as well as committee composition;
Overseeing the Compensation Committee’s development of appropriate objectives for the Chief Executive Officer and monitoring performance against those objectives;
Coordinating and chairing the annual Board performance review of the Chief Executive Officer and communicating results to the Chief Executive Officer;
Leading the Board’s review of the succession plan for the Chief Executive Officer and other executive officers;
Coordinating the Board’s self-assessment and evaluation processes;
Serving as a member of Governance and Nominating Committee and such other committees as assigned by the Board; and
Reviewing, on an annual basis and in consultation with our independent directors, this list of responsibilities and recommending to our Board for approval any modifications or changes.
Committee Overview
The current standing committees of our Board of Directors are the Audit Committee, the Compensation Committee, the Governance and Nominating Committee, the Finance and Corporate Development Committee and the Compliance Committee. In June 2021, we determined to consolidate our former Finance and Corporate Development Committee with our Audit Committee. Each committee consists solely of members who are independent as defined in Rule 5605(a)(2) of the Marketplace Rules of the NASDAQ Stock Market. In addition, each member of our Audit Committee is independent as defined in Exchange Act Rule 10A-3 and each member of our Compensation Committee is a non-employee director under the rules of the Securities and Exchange Commission.
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Each standing committee has a charter, all of which are available on our website at https://investor.pattersoncompanies.com/investor-relations/governance/default.aspx#section=governance or in print upon written request to Patterson Companies, Inc., 1031 Mendota Heights Road, St. Paul, Minnesota 55120, Attention: Investor Relations. Such committees review and reassess the adequacy of their respective charters and recommend any changes to them at least annually. These charters were last reviewed and revised in June 2021 at which time the responsibilities of the former Finance and Corporate Development Committee were integrated with the responsibilities of the Audit Committee. Our committees also engage in an annual review of committee performance.
The following table shows the current membership of our standing committees and identifies our independent directors:
Name
Audit
Compensation
Governance
and
Nominating
Compliance
Independent
Director
John D. Buck
X*
X
X
Alex N. Blanco
X
X
X
Jody H. Feragen
X
X
X
Robert C. Frenzel
X*
X
X
Francis J. Malecha
X
X
X
Ellen A. Rudnick
X*
X
X
Neil A. Schrimsher
X
X
X*
X
Mark S. Walchirk
*
Denotes committee chairperson.
The Board sets the annual schedule of standing committee meetings, with regularly scheduled meetings held adjacent to our Board’s regularly scheduled meetings. In addition to meetings set by the Board, each standing committee meets, either by phone or in person, when and as often as the chairperson of each committee deems appropriate. The chairperson of each standing committee, with the advice and consultation of management and the committees’ outside advisors, if any, sets the agenda for each meeting. Committee members receive detailed materials related to the topics on the agenda prior to each meeting.
Committee Responsibilities
Our Audit Committee and Its Report
Responsibilities and Composition. Our Audit Committee, chaired by Mr. Frenzel, is empowered by our Board of Directors to review our financial books and records in consultation with our accounting and auditing staff and our independent registered public accounting firm, Ernst & Young LLP (“EY”), and to review with our accounting staff and EY the scope of the audit, the audit plan and any questions raised with respect to accounting and auditing policy and procedure. EY reports directly to the committee, which is responsible for the appointment, compensation, retention and oversight of the work of the independent registered public accountants in regards to audit and attest services for our company. The committee’s charter, which discusses the full responsibilities of the committee, is available on our website at https://investor.pattersoncompanies.com/investor-relations/governance/default.aspx or in print upon written request to Patterson Companies, Inc., 1031 Mendota Heights Road, St. Paul, Minnesota 55120, Attention: Investor Relations.
Effective June 2021, the Audit Committee assumed the former responsibilities of the Finance and Corporate Development Committee, which committee met 3 times during fiscal 2021, including overseeing our company’s capital structure, capital budget and capital expenditures, the issuance and repurchase of equity and debt, and acquisitions and divestitures, and corporate investment and treasury policy and their consistency with our company’s overall financial and strategic plans.
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Our Audit Committee was established in accordance with Section 3(a)(58)(A) of the Exchange Act. As noted above, each member of the committee is an independent director as defined in Rule 5605(a)(2) of the Marketplace Rules of the NASDAQ Stock Market. Each member of the committee meets the criteria for independence set forth in Exchange Act Rule 10A-3(b)(1). No member of the committee participated in the preparation of the financial statements of our company or any current subsidiary of our company at any time during the past three years. Each member of the committee is able to read and understand fundamental financial statements, including a company’s balance sheet, income statement, and cash flow statement.
Pursuant to Rule 5605(c)(2) of the Marketplace Rules of the NASDAQ Stock Market, at least one member of the Audit Committee has past employment experience in finance or accounting, requisite professional certification in accounting, or other comparable experience or background which results in the individual’s financial sophistication. In addition, our Board of Directors has determined that Robert C. Frenzel and Jody H. Feragen are each an “audit committee financial expert” as such term is defined by Item 407(d)(5) of Regulation S-K.
Audit Committee Report. As noted above, our Audit Committee oversees our accounting and financial reporting process on behalf of our Board of Directors. Management has primary responsibility for the consolidated financial statements and the reporting process, including the system of internal control. In fulfilling its oversight responsibilities, the committee reviewed and discussed the audited consolidated financial statements included in our company’s Annual Report on Form 10-K for the fiscal year ended April 24, 2021 with management, including a discussion of the quality, not just the acceptability, of the accounting principles; the reasonableness of significant estimates and judgments; and the clarity of disclosures in the financial statements.
After each fiscal quarter but prior to the filing of the related periodic report, our Audit Committee reviews and discusses with management and our independent registered public accounting firm the results of the most recently completed fiscal quarter. The committee held 8 meetings during fiscal 2021.
Our Audit Committee has established procedures for the receipt, retention and treatment of complaints received by our company regarding accounting, internal accounting controls, or auditing matters, and the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters. To report such matters, please call 877-888-0040.
EY has been our company’s independent registered public accounting firm since 1985. When, in accordance with Securities and Exchange Commission rules and EY policies, the lead audit partner is required to rotate after a maximum of five consecutive years of service in that capacity or due to other circumstances, the process for selection of our company’s lead audit partner pursuant to this rotation policy involves a meeting between the chair of our Audit Committee and the candidate for the role, as well as discussion by the full committee and with management. Our company’s lead audit partner was most recently changed in 2019.
Our Audit Committee reviewed with EY, the independent registered public accounting firm that is responsible for expressing an opinion on the conformity of those audited consolidated financial statements with generally accepted accounting principles, its judgments as to the quality, not just the acceptability, of our company’s accounting principles and such other matters as are required to be discussed with the committee by the applicable requirements of the Public Company Accounting Oversight Board. In addition, the committee has discussed with EY the firm’s independence from management and our company, including the matters in the written disclosures and the letter the committee received from EY as required by the applicable requirements of the Public Company Accounting Oversight Board, Communication with Audit Committees Concerning Independence, and considered the compatibility of non-audit services performed by EY during the year on such firm’s independence prior to the commencement of the non-audit services.
Our Audit Committee is committed to ensuring the independence of our company’s independent registered public accountants and directs significant attention toward the appropriateness of the outside auditor to perform services other than the audit. The committee has adopted pre-approval policies and procedures in this regard.
As a matter of policy, the independent registered public accountants will only be engaged for non-audit related work if those services enhance and support the attest function of the audit, are an extension to the audit or audit related services, or relate to tax matters. Annually, the lead audit partner reviews with the Audit Committee the services the outside auditor
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expects to provide in the coming year, and the related fees. In addition, management provides the committee with a quarterly status for the committee’s approval of any non-audit services that the outside auditor has been asked to provide or may be asked to provide in the next quarter. The committee pre-approves all audit and non-audit services provided by the company’s outside auditor.
Our Chief Financial Officer is responsible for the implementation of the Audit Committee’s pre-approval policies and procedures. The committee pre-approved all of the services we received from EY during fiscal 2021.
The Audit Committee discussed with our company’s internal auditors and EY the overall scope and plans for their respective audits. The committee meets with the internal auditors and EY, with and without management present, to discuss the results of their examinations, their evaluations of our company’s internal controls, and the overall quality of our company’s financial reporting.
In reliance on the reviews and discussions referred to above, the Audit Committee recommended to our Board (and our Board approved) that our audited consolidated financial statements be included in our Annual Report on Form 10-K for the fiscal year ended April 24, 2021, for filing with the Securities and Exchange Commission.
The Audit Committee and our Board have recommended and seek shareholder ratification of the selection of EY as our company’s independent registered public accounting firm for the year ending April 30, 2022. In making this recommendation, the committee evaluated the independence of EY, their knowledge and experience with our company, the quality of their past work for our company, their industry knowledge, data relating to their audit quality and performance and the level of fees to be charged for the audit services. The committee and our Board believe that the appointment of EY as our company’s independent registered public accounting firm is in the best interests of our shareholders and our company.
Respectfully submitted,
/s/ Robert C. Frenzel, Chair
/s/ Jody H. Feragen
/s/ Francis J. Malecha
The Audit Committee
Our Compensation Committee and Its Report
Responsibilities and Composition. Our Compensation Committee, chaired by Ms. Rudnick, is authorized by our Board to determine for executive officers, and recommend to the Board for approval with respect to the chief executive officer, all components of annual compensation, to grant stock options, restricted stock and other awards to executive officers under our Amended and Restated 2015 Omnibus Incentive Plan, and to review and recommend to the Board for approval our compensation and benefit plans. Our Compensation Committee held 8 meetings and took action by written consent 3 times during fiscal 2021.
Our Board has determined that each member of our Compensation Committee is independent of management and our company. Further, as noted above, each member of the committee is an independent director and is a non-employee director under the applicable rules of NASDAQ and the Securities and Exchange Commission, respectively.
The Compensation Committee has the dual responsibility of serving the interests of our shareholders and serving as an advisor to management. The committee assists our Board in fulfilling its responsibility to our shareholders that our executive officers and certain other officers and managers are compensated in accordance with our company’s total compensation objectives and executive compensation policy. Management assists the committee by advising and recommending compensation policies, strategies and pay levels necessary to establish appropriate incentives for management and employees that are aligned with business strategies and goals that the committee believes will drive competitive advantage and deliver sustainable returns to shareholders. Other than as permitted under the Amended and Restated 2015 Omnibus Incentive Plan, the committee does not delegate any of its duties or responsibilities to any subcommittee or other person. The committee’s specific responsibilities include:
Evaluate annually our Chief Executive Officer’s and other executive officers’ compensation levels and payouts;
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Determine for our executive officers, and recommend to our Board for approval with respect to the Chief Executive Officer, all components of compensation, including annual base salary levels, annual incentive opportunity levels, long-term incentive opportunity levels, executive perquisites, employment agreements, change-in-control provisions or agreements, severance agreements, benefits, supplemental benefits and any special financial compensation programs;
Review and recommend to our Board for approval any equity compensation program involving the use of our company’s securities, including stock options and restricted stock;
When appropriate, select, retain and terminate independent compensation consultants, independent legal counsel or other advisors to advise the committee;
Ensure that the compensation for our Chief Executive Officer and other executive officers is consistent with our company’s executive compensation policy;
Advise and assist our company in defining its total compensation policy;
Review and comment on the compensation program to ensure that it supports our company’s strategic and financial plans;
Review and recommend to our Board for approval new incentive plans that are consistent with the total compensation policy, and monitor the appropriateness of payouts under alternative business scenarios;
Review retirement plans to ensure they meet company objectives and are in compliance with relevant laws and regulations;
Review the establishment, amendment and termination of employee benefits plans, including equity plans, and oversee the operation and administration of such plans;
Review our company’s compensation policies for regulatory and tax compliance, including structuring compensation programs to preserve tax deductibility and, as required and to the extent applicable under relevant transition relief rules, establishing performance goals and certifying that performance goals have been attained;
Considering the results of the most recent shareholder advisory vote on executive compensation in making determinations and recommendations regarding our company’s executive compensation policy and decisions;
Prepare a report on executive compensation in our company’s proxy statement as required by Securities and Exchange Commission rules;
Review annually our company’s risk assessment to determine whether compensation policies and practices are reasonably likely to have a material adverse effect on our company;
Review and discuss with management the “Compensation Discussion and Analysis” required by Securities and Exchange Commission Regulation S-K, Item 402, and determine whether to recommend to our Board that the “Compensation Discussion and Analysis” be included in our company’s annual proxy statement for the annual meeting of shareholders;
Review and modify, as appropriate, stock ownership guidelines applicable to executive officers and non-employee directors, and oversee the application of such guidelines; and
Fulfill such other duties and responsibilities as may be assigned to the committee by our Board or Chairman of the Board.
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In fulfilling its duties and responsibilities, the Compensation Committee may hire independent consultants, confer with our internal human resource professionals and consult with our Chief Executive Officer and other members of management. In the most recently completed fiscal year, the committee engaged and worked with Pearl Meyer, an independent compensation consultant that has no other ties to our company or its management, to review compensation philosophy, competitiveness, pay for performance, and short term and long term compensation design. In the most recently completed fiscal year, Pearl Meyer provided a recommendation to the committee regarding the terms of the proposed amendment to our Amended and Restated 2015 Omnibus Incentive Plan. The committee believes that Pearl Meyer is independent of our management. Our management has not engaged Pearl Meyer to provide any other services to our company.
During the Compensation Committee meetings held in fiscal 2021, certain members of management were present to address specific topics within the scope of their responsibilities. In addition, our Chief Executive Officer, our Chief Financial Officer, our Chief Human Resources Officer and our Vice President, General Counsel and Secretary attended several of the meetings to provide certain recommendations to the committee regarding the compensation of other executive officers and to discuss the financial implications of various compensatory awards and benefit programs. No such executive officer was present during the committee’s discussion and determination of his or her respective compensation.
Compensation Committee Interlocks and Insider Participation. The members of our Compensation Committee are identified by name in the “Compensation” column of the chart that appears above within the subsection captioned “Committee Overview.” None of the members of the committee was an officer or employee of Patterson Companies, Inc. during fiscal 2021 or in any prior year, and none of the members of the committee had any relationship requiring disclosure under Item 404 of Regulation S-K. There were no Compensation Committee interlocks as described in Item 407(e)(4) of Regulation S-K.
Compensation Committee Report. Our Compensation Committee has reviewed and discussed the “Compensation Discussion and Analysis” that appears herein with management. Based on such review and discussions, the committee recommended to our Board that the “Compensation Discussion and Analysis” be included in this proxy statement and, thereby, in our Annual Report on Form 10-K for the fiscal year ended April 24, 2021.
Respectfully submitted,
/s/ Ellen A. Rudnick, Chair
/s/ Alex N. Blanco
/s/ Francis J. Malecha
/s/ Neil A. Schrimsher
The Compensation Committee
Our Governance and Nominating Committee and Its Procedures for Nominations
Responsibilities and Composition. Our Governance and Nominating Committee, chaired by Mr. Buck, performs the core function of providing the overall protocol for Board operation to improve the effectiveness of the Board. It also serves as the nominating committee, making recommendations as to nominees to serve as members of our Board and regarding the composition of the committees of our Board. The committee’s responsibilities include establishing criteria for Board and committee membership, considering rotation of committee members, reviewing candidates’ qualifications and any potential conflicts with our interests, assessing the contributions of current directors in connection with their re-nomination, and making recommendations to the full Board on how to improve the effectiveness of our Board. The committee believes that diversity of viewpoints, backgrounds, skills, experience and expertise is a key attribute for directors. As a result, the committee seeks to have a diverse Board that is representative of our company’s customer, employee and shareholder base. The committee carefully considers diversity when considering nominees for director and periodically reviews its recruitment and selection protocols to ensure that diversity remains a component of each director search.
Our Governance and Nominating Committee has identified nominees based upon suggestions by non-employee directors, executive officers, shareholders and third-party search firms. Our director selection criteria as provided in our Corporate
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Governance Guidelines, includes: integrity; high level of education; business experience; broad-based business acumen; understanding of our business and industry; strategic thinking and willingness to share ideas; network of contacts; and diversity of experiences, expertise and backgrounds among members; balanced representation of the best interests of the company’s shareholders as a whole rather than special constituencies; and any potential conflicts with the company’s interests. The committee has used these criteria to evaluate potential nominees. The committee does not evaluate proposed nominees differently depending upon who has made the recommendation.
Our Governance and Nominating Committee has from time to time engaged third-party search firms to provide assistance in the identification and evaluation of potential nominees, whose qualifications and independence are then thoroughly evaluated by the committee. The committee has paid fees to third-party search firms for such assistance.
It is our Governance and Nominating Committee’s policy to consider director candidates recommended by shareholders who appear to be qualified to serve on our Board. The committee may choose not to consider an unsolicited recommendation if no vacancy exists on our Board and the committee does not perceive a need to increase the size of our Board. The committee will consider only those director candidates recommended in accordance with the procedures set forth below.
Nomination Procedures. To submit a recommendation of a director candidate to our Governance and Nominating Committee, a shareholder must submit the following information in writing, addressed to our Chairman of the Board, care of our Corporate Secretary, at the main office of Patterson Companies, Inc.:
The name of the person recommended as a director candidate;
All information relating to such person that is required to be disclosed in solicitations of proxies for election of directors pursuant to Exchange Act Regulation 14A;
The written consent of the person being recommended as a director candidate to being named in the proxy statement as a nominee and to serving as a director if elected;
As to the shareholder making the recommendation, the name and address, as they appear on the books of Patterson Companies, Inc., of such shareholder; provided, however, that if the shareholder is not a registered holder of common stock, the shareholder must submit his or her name and address along with a current written statement from the record holder of the shares that reflects ownership of our common stock; and
A statement disclosing whether such shareholder is acting with or on behalf of any other person and, if applicable, the identity of such person.
Our Bylaws provide that in order for a person nominated by a shareholder to be eligible for election as a director at any regular or special meeting of shareholders, a written request that his or her name be placed in nomination must be received from a shareholder of record by our Corporate Secretary not less than 90 days prior to the date fixed for the meeting, together with the written consent of such person to serve as a director. A copy of our Bylaws may be obtained by written request to Patterson Companies, Inc., 1031 Mendota Heights Road, St. Paul, Minnesota 55120, Attn: Les B. Korsh, Vice President, General Counsel and Secretary.
Minimum Qualifications. In carrying out its responsibility to find the best-qualified persons to serve as directors, our Governance and Nominating Committee will consider appropriate data with respect to each suggested candidate, consisting of business experience, educational background, current directorships, involvement in legal proceedings during the last ten years which are material to the evaluation of the integrity of the candidate, and an indication of the willingness of the candidate to serve as a director.
In addition, prior to nominating an existing director for re-election to our Board, our Governance and Nominating Committee will consider and review an existing director’s Board and committee attendance and performance; length of
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Board service; experience, skills and contributions that the existing director brings to our Board; and his or her independence. Pursuant to our Corporate Governance Guidelines, independent directors generally may not stand for election following their attaining the age of 75, or 20 years of service as a director on our Board.
Our Governance and Nominating Committee is also responsible for overseeing and reviewing our processes for providing information to our Board. The committee completes an annual review of the performance of our Chief Executive Officer. In addition, the committee recommends a succession plan to our Board for our Chief Executive Officer and reviews programs created and maintained by management for the development and succession of other executive officers and other individuals identified by management or the committee. The committee develops and oversees a company orientation program for new directors and a continuing education program for current directors. The committee also sets director compensation. The committee held 3 meetings during fiscal 2021.
In addition, our Governance and Nominating Committee advises the Board on matters of environmental and social governance that are of strategic significance to the company, provides oversight of the company’s sustainability, corporate social responsibility and corporate citizenship matters, and maintains an informed status on such matters through discussions and receipt of reports from management.
Our Compliance Committee
Purpose. Our Compliance Committee, chaired by Mr. Schrimsher, is authorized by our Board to oversee and monitor matters relating to our company’s compliance with applicable laws and regulations in all jurisdictions in which we operate, other than those matters reserved for the Audit Committee. Management has primary responsibility for compliance with relevant laws, our company’s Compliance Program and other relevant standards.
Our company’s Compliance Program includes, solely as related to compliance, the following topics: antitrust; Code of Ethics; conflicts of interest; Controlled Substances Act and related DEA requirements; consumer protection; customs and trade, including import and export matters; data privacy and data security; ethics; environment; False Claims Act; FDA regulations and requirements, including the Federal Food, Drug and Cosmetic Act; Foreign Corrupt Practices Act and similar anti-bribery laws; Fraud and Abuse Laws, including the Anti-Kickback Statute; government relations; health and safety; Health Insurance Portability and Accountability Act; interactions with healthcare professionals; information systems security; labor and employment; physical security; quality; recalls; regulatory compliance; sales of products or services to U.S. or foreign governments, including entities owned by such governments; Sunshine Act and other laws relating to reporting of and transparency with respect to payments to healthcare professionals; transportation; and such other matters as may be requested by the Compliance Committee.
Responsibilities and Organization. The responsibilities of our Compliance Committee include:
Provide oversight and monitoring of compliance matters, provided that the Audit Committee has sole oversight over compliance programs relating to financial matters, including auditing, financial reporting and disclosures to investors;
Provide oversight and monitoring of our company’s Compliance Program and receive periodic reports from management regarding the same;
Monitor our company’s efforts to implement programs, policies and procedures relating to compliance matters, and the training of employees and others on such matters;
Review the results of compliance-related audits conducted by our company and by regulators, such as the DEA and FDA;
Request or oversee the investigation of any significant instances or potential instances of noncompliance with laws or our company’s Compliance Program, polices or procedures; provided, however, that any instances or potential instances of financial noncompliance are to be directed to the Audit Committee for investigation;
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Review any violations of our company’s Code of Conduct by any executive officer or director, and review, assess and/or recommend corrective action;
If there is a government or regulatory action that, in the judgment of the committee, has caused significant financial or reputational damage to our company or otherwise indicates a significant compliance or regulatory issue within our company, then the committee shall make a written recommendation to the Compensation Committee concerning the extent, if any, to which the incentive-based compensation of any executive officer involved in the conduct at issue or with direct supervision over an employee that engaged in the conduct at issue should be reduced, extinguished, or recouped;
Review on a regular basis litigation matters filed against our company related to alleged violations of laws and regulations;
Review on a regular basis our company’s compliance risk assessment plan;
Identify and investigate emerging compliance issues and trends which may affect our company;
Periodically review our company’s compliance oversight structure and allocation of resources and responsibilities across the organization;
Conduct an annual evaluation of the performance and effectiveness of the Compliance Committee and report the results of that evaluation to the Board;
Report to the Audit Committee on compliance matters reviewed by the Compliance Committee that may impact our company’s financial statements and our accounting and financial reporting processes;
At least annually, coordinate with the Audit Committee to discuss matters of mutual interest within the context of each committee’s respective areas of oversight; and
Have such other duties and oversight and monitoring responsibilities as may be assigned from time to time by the Board and/or the Chairman of the Board.
Our Compliance Committee reports to our Board on the principal matters reviewed or approved at each meeting and provides recommendations as to actions to be taken by our Board. The committee has the sole authority to retain and terminate any outside financial or other consultants to assist in carrying out its duties, including the authority to approve consultant fees and other retention terms. The committee has the authority to obtain advice and assistance from internal or external legal, financial or other advisors. In addition, the committee has the authority to delegate any of its responsibilities to subcommittees, as it deems appropriate, subject to the requirements of applicable laws and regulations. The committee held 4 meetings during fiscal 2021.
Communications with Board Members
Our Board of Directors has provided the following process for interested persons to send communications to our Board or individual directors. All communications from shareholders should be addressed to Patterson Companies, Inc., 1031 Mendota Heights Road, St. Paul, Minnesota 55120, Attention: Les B. Korsh, Vice President, General Counsel and Secretary. Communications to individual directors may also be made to such director at our company’s address. All communications sent to the chair of our Audit Committee or to any individual director will be received directly by such individuals and will not be screened or reviewed by any company personnel. Any communications sent to our Board in the care of our Corporate Secretary will be reviewed by him to ensure that such communications relate to the business of our company or its subsidiaries before being reviewed by our Board.
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Board Member Attendance at Annual Meetings
Under our Corporate Governance Guidelines, it is our policy that all directors should be present at the annual meeting of shareholders. We generally hold a Board of Directors meeting coincident with the shareholders’ meeting to facilitate their attendance at the shareholders’ meeting. All directors then in office attended the 2020 annual meeting of shareholders.
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NON-EMPLOYEE DIRECTOR COMPENSATION
Non-employee directors receive cash compensation and equity-based compensation for their service on our Board of Directors. For fiscal 2021, non-employee director compensation included an overall Board retainer of $206,000, with $90,000 representing an annual cash retainer and $116,000 issued in the form of restricted stock awards vesting one year from date of grant. Committee member and committee chair annual cash retainers were as follows: $10,000 for each member of the Audit Committee and an additional $20,000 for the chair of the Audit Committee; $5,000 for each member of the Compensation Committee and an additional $15,000 for the chair of the Compensation Committee; a $10,000 cash retainer for the chair of the Governance and Nominating Committee; and $10,000 for each member of the Compliance Committee and an additional $20,000 for the chair of the Compliance Committee. During its existence, each member of our former Finance and Corporate Development Committee received $5,000 and the chair of such committee received an additional $15,000. In addition, the non-executive Chairman of the Board receives an annual cash retainer of $100,000. Non-employee directors may elect to receive shares of common stock in lieu of their director fees otherwise payable in cash. Directors are also reimbursed for all reasonable out-of-pocket expenses incurred in connection with their service on our Board.
As part of our broad-based effort to implement cost saving measures in response to the COVID-19 pandemic, our Board agreed to a reduction of 25% of non-employee directors’ cash compensation earned from May 1, 2020 through July 31, 2020. Non-employee directors’ cash compensation was restored beginning August 1, 2020, but there was no retroactive reinstatement of forgone cash compensation.
For fiscal 2022, Pearl Meyer, the Compensation Committee’s independent compensation consultant, benchmarked our non-employee director compensation program against our peer group and similarly-sized public companies across all industries. Based on this market review and the limited frequency with which our Governance and Nominating Committee typically reviews and adjusts the compensation of non-employee directors, the committee implemented the following changes for fiscal 2022 compensation:
Maintained annual cash retainer of $90,000;
Increased all committee chair retainers to $25,000;
Increased all committee member retainers to $10,000;
Increased the annual equity retainer to $145,000; and
Maintained the annual cash retainer of $100,000 for the non-executive Chairman of the Board.
Under our Amended and Restated 2015 Omnibus Incentive Plan, annual restricted stock awards vest in full on the first anniversary of the date of grant. Non-employee directors who have a term expiring not more than 29 days prior to the natural vesting date of their restricted stock award are deemed to remain in service as a non-employee director until such natural vesting date, but only for purposes of satisfying the vesting restrictions. Otherwise, unvested restricted stock awards are forfeited on the effective date of termination of service as a director.
Because Mr. Walchirk served as a director and an executive officer of our company for fiscal 2021, information regarding his compensation is set forth within the section captioned “Executive Compensation.”
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Compensation of Directors
The following table sets forth the compensation of our non-employee directors for fiscal 2021:
Name
Fees
Earned
or
Paid in
Cash
($)
Stock
Awards
($) (a)
Option
Awards
($) (b)
Non-Equity
Incentive Plan
Compensation
($)
Change in Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)
All Other
Compensation
($)
Total
($)
John D. Buck
196,875
116,001
-
-
-
-
312,876
Alex N. Blanco
107,813
116,001
-
-
-
-
223,814
Jody H. Feragen
121,875
116,001
-
-
-
-
237,876
Robert C. Frenzel
117,188
116,001
-
-
-
-
233,189
Francis J. Malecha
103,125
116,001
-
-
-
-
219,126
Ellen A. Rudnick
107,813
116,001
-
-
-
-
223,814
Neil A. Schrimsher
117,188
116,001
-
-
-
-
233,189
(a)
Represents the aggregate grant date fair value of the 4,704 shares of restricted stock awarded to each non-employee director on September 14, 2020, the date of our 2020 annual meeting of shareholders, computed in accordance with FASB ASC Topic 718. Information on the assumptions used to calculate such value is set forth in Note 15 to the consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended April 24, 2021. The aggregate number of unvested shares of restricted stock outstanding at fiscal year-end 2021 held by our non-employee directors was as follows:
Name
Number of
Shares of
Restricted Stock
John D. Buck
4,704
Alex N. Blanco
4,704
Jody H. Feragen
4,704
Robert C. Frenzel
4,704
Francis J. Malecha
4,704
Ellen A. Rudnick
4,704
Neil A. Schrimsher
4,704
Total
32,928
(b)
The aggregate number of unexercised stock options outstanding at fiscal year-end 2021 held by our non-employee directors was as follows:
Name
Number of Stock
Options
John D. Buck
-
Alex N. Blanco
-
Jody H. Feragen
-
Robert C. Frenzel
-
Francis J. Malecha
-
Ellen A. Rudnick
-
Neil A. Schrimsher
12,000
Total
12,000
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial ownership of our common stock as of July 16, 2021, unless otherwise noted, by (a) each person who is known to us to own beneficially more than 5% of our common stock, (b) each director and nominee for director, (c) each executive officer named in the Summary Compensation Table below, and (d) the current directors and executive officers as a group. The table lists voting securities, including restricted stock held by our directors and executive officers over which they have sole voting power but no investment power. Otherwise, except to the extent noted below, each person identified below has sole voting and investment power over the shares reported. Except as otherwise noted below, we know of no agreements among our shareholders which relate to voting or investment power with respect to our common stock and none of the stated shares has been pledged as security.
Name and Address of Beneficial Owner (a)
Amount and Nature
of Beneficial
Ownership (a)
Percent of
Class (b)
T. Rowe Price Associates, Inc.
13,368,604(c)
13.7%
BlackRock, Inc.
10,243,209(d)
10.5%
Delaware Charter Guarantee & Trust Company dba Principal Trust Company as Directed Trustee for the Patterson Companies, Inc. Employee Stock Ownership Plan
10,162,000(e)
10.5%
FMR LLC
9,413,799(f)
9.7%
The Vanguard Group
8,379,997(g)
8.6%
Mark S. Walchirk
704,192(h)(i)
*
Donald J. Zurbay
310,183(h)(i)
*
Les B. Korsh
183,617(h)(i)
*
Kevin M. Pohlman
164,012(h)(i)
Eric R. Shirley
86,942(h)(i)
*
John D. Buck
70,203
*
Ellen A. Rudnick
60,869
*
Neil A. Schrimsher
38,122(j)
*
Jody H. Feragen
34,479(k)
*
Alex N. Blanco
18,634
*
Robert C. Frenzel
15,576
*
Francis J. Malecha
15,576
*
All current directors and executive officers as a group (13 persons)
1,782,301(l)
1.8%
*
Represents less than 1%.
(a)
Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and includes voting or investment power with respect to securities. Securities “beneficially owned” by a person may include securities owned by or for, among others, the spouse, children or certain other relatives of such person as well as other securities as to which the person has or shares voting or investment power or has the option or right to acquire within 60 days. The same shares may be beneficially owned by more than one person. Includes shares of common stock held by our ESOP. Shares reported as owned by the ESOP trustee are also reported as beneficially owned by our executive officers to the extent that shares have been allocated to the ESOP accounts of the named persons. Allocated shares are voted by the ESOP trustee in accordance with the direction of ESOP participants. Generally, unallocated shares and allocated shares as to which no direction is made by the participants are voted by the ESOP trustee in the same percentage as the allocated shares as to which directions are received by the ESOP trustee. Unless otherwise indicated, the address of each shareholder is c/o Patterson Companies, Inc., 1031 Mendota Heights Road, St. Paul, Minnesota 55120.
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(b)
Percentage of beneficial ownership is based on 97,229,896 shares outstanding as of July 16, 2021. Shares issuable pursuant to options are deemed outstanding for computing the percentage of the person holding such options but are not deemed outstanding for computing the percentage of any other person.
(c)
As set forth in Schedule 13G/A jointly filed with the Securities and Exchange Commission by T. Rowe Price Associates, Inc. (“Price Associates”) and T. Rowe Price Mid-Cap Value Fund, Inc. (“Mid-Cap Value Fund”) on February 16, 2021. The Schedule 13G/A reports that Price Associates is an investment adviser with sole voting power over 4,745,377 shares and sole dispositive power over 13,368,604 shares. The Schedule 13G/A reports that Mid-Cap Value Fund is a registered investment company sponsored by Price Associates, which it also serves as investment adviser, with sole voting power over 8,538,021 shares, representing 8.8% of the class of such securities. The Schedule 13G/A further reports as follows: Price Associates does not serve as custodian of the assets of any of its clients; accordingly, in each instance only the client or the client’s custodian or trustee bank has the right to receive dividends paid with respect to, and proceeds from the sale of, the reported securities. The individual and institutional clients which Price Associates serves as investment adviser have the power to direct the receipt of dividends paid with respect to, and the proceeds from the sale of, the reported shares, and any discretionary authority that has been delegated to Price Associates may be revoked in whole or in part at any time. With the exception of Mid-Cap Value Fund, not more than 5% of the security class being reported on the Schedule 13G/A is owned by any one client subject to the investment advice of Price Associates. With respect to securities owned by Mid-Cap Value Fund, only the custodian for such fund has the right to receive dividends paid with respect to, and proceeds from the sale of, the reported securities, and that no other person is known to have such right, except that the shareholders of the Mid-Cap Value Fund participate proportionately in any dividends and distributions so paid. The reporting persons’ address is 100 E. Pratt Street, Baltimore, MD 21202.
(d)
As set forth in Schedule 13G/A filed with the Securities and Exchange Commission by BlackRock, Inc. (“BlackRock”) on January 27, 2021. The Schedule 13G/A reports that BlackRock is a parent holding company/control person for BlackRock Life Limited, BlackRock Advisors, LLC, BlackRock (Netherlands) B.V., BlackRock Fund Advisors (which entity beneficially owns 5% or greater of the outstanding shares of the security class being reported on the Schedule 13G/A), BlackRock Institutional Trust Company, National Association, BlackRock Asset Management Ireland Limited, BlackRock Financial Management, Inc., BlackRock Japan Co., Ltd., BlackRock Asset Management Schweiz AG, BlackRock Investment Management, LLC, BlackRock Investment Management (UK) Limited, BlackRock Asset Management Canada Limited, BlackRock (Luxembourg) S.A., BlackRock Investment Management (Australia) Limited, and BlackRock Fund Managers Ltd. The Schedule 13G/A reports that BlackRock has sole voting power over 9,992,557 shares and sole dispositive power over 10,243,209 shares. The Schedule 13G/A further reports that various persons have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the reported shares, but no one person’s interest in the reported shares is more than 5% of the total outstanding shares. The reporting person’s address is 55 East 52nd Street, New York, NY 10055.
(e)
As set forth in Schedule 13G/A filed with the Securities and Exchange Commission by Delaware Charter Guarantee & Trust Company dba Principal Trust Company as Directed Trustee for the Patterson Companies, Inc. Employee Stock Ownership Plan (“ESOP”) on February 11, 2021. The Schedule 13G/A reports as follows: The reported shares represent shares over which shared voting power and shared dispositive power is claimed. The ESOP is subject to the Employee Retirement Income Security Act of 1974 (“ERISA”). Delaware Charter Guarantee & Trust Company dba Principal Trust Company acts as the directed trustee of the ESOP. The securities reported include all shares held of record by the trustee. The trustee follows the directions of our company, or other parties designated in the trust agreement between our company and the trustee, with respect to voting and disposition of the shares. The trustee, however, is subject to fiduciary duties under ERISA. The trustee disclaims beneficial ownership of the reported shares. As of July 16, 2021, the number of shares reported as beneficially owned represented shares held in the allocated account of the ESOP. The reporting person’s address is 1013 Centre Road, Suite 300, Wilmington, DE 19805-1265.
(f)
As set forth in Schedule 13G filed with the Securities and Exchange Commission by FMR LLC (“FMR”) and Abigail P. Johnson on February 8, 2021. The Schedule 13G reports that FMR is a parent holding company for FIAM LLC, Fidelity Institutional Asset Management Trust Company, Fidelity Management & Research Company LLC
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(which entity beneficially owns 5% or greater of the outstanding shares of the security class being reported on the Schedule 13G), and Strategic Advisers LLC. The Schedule 13G reports that FMR has sole voting power over 1,812,532 shares and sole dispositive power over 9,413,799 shares. The Schedule 13G further reports that various persons have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of the reported shares, but no one person’s interest in the reported shares is more than 5% of the total outstanding shares. The reporting person’s address is 245 Summer Street, Boston, MA 02210. The Schedule 13G also reports as follows: Abigail P. Johnson is a director, the Chairman and the Chief Executive Officer of FMR. Members of the Johnson family, including Abigail P. Johnson, are the predominant owners, directly or through trusts, of Series B voting common share of FMR, representing 49% of the voting power of FMR. The Johnson family group and all other Series B shareholders have entered into a shareholders’ voting agreement under which all Series B voting common shares will be voted in accordance with the majority vote of Series B voting common shares. Accordingly, through their ownership of voting common shares and the execution of the shareholders’ voting agreement, members of the Johnson family may be deemed, under the Investment Company Act of 1940, to form a controlling group with respect to FMR. Neither FMR nor Abigail P. Johnson has the sole power to vote or direct the voting of the shares owned directly by the various investment companies (“Fidelity Funds”) advised by FMR, which power resides with the Fidelity Funds’ Boards of Trustees. FMR carries out the voting of the shares under written guidelines established by the Fidelity Funds’ Boards of Trustees.
(g)
As set forth in Schedule 13G/A filed with the Securities and Exchange Commission by The Vanguard Group (“Vanguard”) on February 10, 2021. The Schedule 13G reports that Vanguard is a parent holding company for Vanguard Asset Management, Limited, Vanguard Fiduciary Trust Company, Vanguard Global Advisors, LLC, Vanguard Group (Ireland) Limited, Vanguard Investments Australia Ltd., Vanguard Investments Canada Inc., Vanguard Investments Hong Kong Limited, and Vanguard Investments UK, Limited. The Schedule 13G/A reports that Vanguard is an investment adviser with sole voting power over no shares, shared voting power over 85,570 shares, sole dispositive power over 8,225,848 shares, and shared dispositive power over 154,149 shares. The reporting person’s address is 100 Vanguard Blvd., Malvern, PA 19355.
(h)
Includes the following shares allocated to the ESOP account of the following persons: Mark S. Walchirk (1,215 shares); Donald J. Zurbay (1,061 shares); Les B. Korsh (1,976 shares); Kevin M. Pohlman (1,660 shares); and Eric R. Shirley (623 shares). The ESOP trustee has the right to receive, and the power to direct the receipt of, dividends from such shares.
(i)
Includes shares purchasable by the named person upon the exercise of options granted under our Amended and Restated Equity Incentive Plan, our Amended and Restated 2015 Omnibus Incentive Plan or as inducement awards issued outside such plans: Mark S. Walchirk (374,815 shares); Donald J. Zurbay (204,367 shares); Les B. Korsh 92,115 shares); Kevin M. Pohlman (63,571 shares); and Eric R. Shirley (30,752 shares).
(j)
Includes 12,000 shares purchasable upon the exercise of options granted under our Amended and Restated Equity Incentive Plan.
(k)
Of the shares reported as beneficially owned, 1,000 shares are held in a revocable trust of which Ms. Feragen is a trustee.
(l)
Includes 7,605 shares allocated to ESOP accounts, 815,004 shares purchasable upon the exercise of options, and 473,854 shares over which there is sole voting power but no investment power.
SECTION 16(a) REPORTS
Section 16(a) of the Exchange Act requires our officers and directors, and persons who own more than 10% of a registered class of our equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission and provide us with copies of such reports. Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons that no Forms 5 were required for those persons, we believe that, during the past fiscal year, our officers, directors and greater than 10% shareholders complied with applicable filing requirements.
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EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Our Compensation Committee (throughout this Compensation Discussion and Analysis, the “committee”) oversees and makes decisions regarding our executive compensation and benefit programs. The following discussion should be read in conjunction with the Summary Compensation Table, and related tables and footnote disclosures setting forth the compensation of the following named executive officers:
Named Executive Officer
Position
Mark S. Walchirk
President and Chief Executive Officer
Donald J. Zurbay
Chief Financial Officer and Treasurer
Eric R. Shirley
Former President, Patterson Dental*
Les B. Korsh
Vice President, General Counsel and Secretary
Kevin M. Pohlman
President, Patterson Animal Health
*
Mr. Shirley ceased serving as President of Patterson Dental effective July 19, 2021, at which time he assumed the role of Senior Vice President of Business Development of Patterson Dental.
Executive Summary
Compensation Actions in Response to COVID-19. With the COVID-19 pandemic impacting our customers and operations, our top priorities in fiscal 2021 were ensuring the health and safety of our employees, customers and the communities we serve, while continuing to execute on our strategy. We reduced discretionary spending and focused our efforts on working capital to manage through the near-term impact and economic uncertainty. From the height of the disruption early in fiscal 2021 (which fiscal year, as a reminder, began in late April 2020), we have seen improvement and positive indicators as we exited fiscal 2021. The operational and financial actions management took in fiscal 2021, including temporary base salary reductions for our named executive officers and other members of management, helped reduce the impact that the COVID-19 pandemic had on our performance results. As detailed below, the committee reinforced the spirit of togetherness by subjecting all named executive officers and other members of management to the same short-term incentive plan design to provide equitable award opportunities in the context of significant uncertainty.
The committee regularly monitored our operating results and our resulting compensation programs during fiscal 2021. Despite the extraordinary events throughout the year, the original incentive design adopted at the beginning of the year achieved the intended pay-for-performance results. Therefore, no year-end discretion or modifications were applied to the incentive calculations based on our company’s performance and alignment with shareholder value creation. Through our cost savings actions and compensation plan design, we believe we are emerging stronger – together – with a renewed focus on innovation, resiliency and sustainability to better serve all of our stakeholders.
Financial results for our fiscal 2021, which ended on April 24, 2021, reflected the sales and income improvements we achieved. These performance improvements enabled us to deliver year-over-year adjusted earnings growth and are reflected in our fiscal 2021 executive compensation.
Performance Results. The summary below contains certain non-GAAP financial metrics. See the reconciliation of GAAP to non-GAAP financial measures tables, which appear as Annex A to this proxy statement, for further information regarding our adjusted financial metrics. These non-GAAP measures may provide a helpful representation of our 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.
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Fiscal 2021 results As depicted in the table below, consolidated reported net sales for fiscal 2021 were $5.91 billion, a 7.7 percent year-over-year increase.


Fiscal 2021 reported net sales of our Dental and Animal Health segments were as follows:

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Reported net income attributable to Patterson Companies, Inc. and adjusted net income attributable to Patterson Companies, Inc., which excludes deal amortization, integration and business restructuring expenses, legal reserve costs, accelerated debt-related costs, investment (gain) loss and goodwill impairment, were as follows:


Balance sheet data. During fiscal 2021, we used $731.1 million of cash from operating activities and collected deferred purchase price receivables of $834.5 million, netting $103.4 million in cash, compared to a total of $297.4 million during fiscal 2020. Free cash flow, which we define as net cash (used in) provided by operating activities less capital expenditures less the one-time benefit from the initiation of our trade accounts receivable facilities plus collection of deferred purchase price receivables, was $77.7 million, which was $148.9 million lower than in fiscal 2020 due to an increased level of working capital during fiscal 2021.
Shareholder Returns. During fiscal 2021, our stock price increased from $16.69 per share on April 25, 2020 to $33.46 per share on April 23, 2021 and we paid more than $75.2 million in dividends to our shareholders. Assuming reinvestment of dividends, the total return to shareholders in fiscal 2021 was 126.8%. The following chart depicts the increase in the market price of our company’s common stock from fiscal year end 2020 to fiscal year end 2021.
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Compensation Decisions
Due to macroeconomic uncertainty attributable to COVID-19, the management team took immediate actions to protect the health and safety of our employees and their families, our customers, our suppliers, and our business partners, to ensure business continuity for our customers, and to help to reduce the spread of the virus in our communities. Management also acted quickly to implement aggressive cost savings measures, suspend all non-essential capital expenditures and take additional measures to preserve our liquidity. Management’s efforts to strengthen Patterson positioned us well to navigate this near-term disruption. Due to operating improvements following the initial impact of COVID-19, the overall value of our fiscal 2021 executive compensation package was above target, reflecting financial performance that exceeded our objectives.
Base Salary. As part of the above-referenced temporary liquidity measures, from May 2020 through July 2020, our named executive officers experienced base salary reductions of 30% (35% in the case of Mr. Walchirk). Base salaries were restored beginning in August 2020, but there was no retroactive reinstatement of forgone pay. Effective January 2021, base salary increases were implemented to reflect a combination of factors including internal equity, positioning against external benchmarks, experience in role, and individual performance.
Annual Short-Term and Long-Term Incentives. During fiscal 2021, we continued to emphasize the importance of fiscal 2021 operational results to our company’s long-term success by aligning executive compensation with enterprise performance objectives. In addition, as part of the committee’s effort to move away from the one-year performance period design utilized in fiscal 2019 and fiscal 2020 and toward a standard three-year performance period for its long-term performance-based incentive awards, it adopted a “hybrid” approach to fiscal 2021 in which each performance award utilizes three distinct annual performance targets and corresponding financial metrics, with a cumulative three-year modifier based on our total shareholder return against the S&P 400 Midcap Index. This move reflected the committee’s desire to measure three years of performance and apply a three-year modifier while retaining the ability to reorient management’s focus on different performance objectives in the second and third year of the award, which the committee believed was an important attribute given the macroeconomic uncertainty at the time it made these awards.
Short-Term Incentives. In light of the macroeconomic uncertainty associated with the COVID-19 pandemic, we modified the short-term incentive program for fiscal 2021 in two important ways:
We simplified the performance measurement to create a single, unified focus on firm-wide results. We designed our short-term incentives with an STI pool in which all management, including our named executive officers, were eligible to participate. The funding for the fiscal 2021 Management Incentive Compensation Plan (“MICP”) was based on a percentage of our company’s consolidated adjusted operating income (which we refer to as “adjusted operating income”) for fiscal 2021 with each executive’s target opportunity (expressed as a percentage in relation to his or her fiscal 2021 base salary) in proportional relationship to the total STI pool. The committee determined to subject all executives and other members of management, including business unit presidents and non-business unit leaders, to the
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same short-term incentive plan design to provide equitable award opportunities in the context of significant uncertainty. Despite the use of a single metric, the committee regarded its selection of adjusted operating income as a measure reflective of various financial inputs of significance to our company during fiscal 2021.
We “flattened the curve” of the incentive payout opportunity, to reflect the difficulty of goal-setting for fiscal 2021 and to minimize the risk of payouts not aligned with performance. By requiring a threshold level of achievement for any payout and graduating the payout scale at increasing levels of adjusted operating income, the committee sought to manage through the macroeconomic uncertainty with a short-term incentive plan that would serve to retain management but only reward management if the shareholders also benefitted. Despite the disruption in early fiscal 2021, we surpassed our adjusted operating income objectives for the full year. As a result, our MICP funded at 145% of target for our named executive officers.
Long-Term Incentives. For fiscal 2021, long-term incentive target opportunities were delivered 50% in performance units and 25% each in stock options and restricted stock units. The performance units are subject to three distinct annual targets, with each year accounting for one-third of the total opportunity. A cumulative relative total shareholder return (“rTSR”) modifier based on the S&P 400 Mid-Cap Index will be applied at the end of the three-year period to adjust the amount conditionally earned up or down, by up to 20%. Although the total number of performance unit awards issued was determined by reference to the value of the award established at the beginning of the three-year cycle, the committee decided, in light of the economic uncertainty at the beginning of fiscal 2021, it would set performance goals at the beginning of each year in the three-year cycle. With respect to the initial one-year performance period, the committee continued its desire to focus the organization on execution and, as such, it determined to utilize the metrics of consolidated adjusted net income (which we refer to as “adjusted net income”) and EBITDA leverage ratio, each weighted 50%. Adjusted net income, for purposes of computing the first-year performance under the fiscal 2021 performance unit awards, is defined as non-GAAP adjusted net income for fiscal 2021 as reported by our company in its earnings release for fiscal 2021, subject to any negative discretion exercised by the committee. EBITDA leverage ratio, for purposes of computing the first year performance under the fiscal 2021 performance units awards, is calculated and defined as the quarterly average of our company’s debt to EBITDA ratio throughout fiscal 2021, with debt and EBITDA measured as defined in our company’s credit agreements with its lenders. For fiscal 2021, we surpassed both our adjusted net income and EBITDA leverage ratio objectives. Performance units for the first year of the three-year cycle therefore funded at 150% of target. Total shares conditionally earned over the three-year cycle do not vest until July 2023 at which time they will be subject to the above-referenced modifier. The stock options vest one-third each year, starting one year after grant, and the restricted stock units vest in full three years after grant.
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As shown in the charts below for Mark S. Walchirk, our Chief Executive Officer, and the average of our other named executive officers, fiscal 2021 actual total direct compensation was above target pay levels as our performance was above target and a significant portion of the total pay opportunity is earned over the long-term. Actual compensation reflects our base salaries, funding of our MICP on our financial performance metrics, performance units conditionally earned based on fiscal 2021 performance (valued at our fiscal year-end stock price), and the other long-term incentives we granted in fiscal 2021 as shown in the Grants of Plan-based Awards Table.
Fiscal 2021 Direct Compensation – Value Reflecting Fiscal 2021 Performance

Note: Because the fiscal 2021 performance units are subject to three distinct annual targets, with each year accounting for one-third of the total opportunity, and a cumulative rTSR modifier based on the S&P 400 Mid-Cap Index at the end of the three-year period, the performance unit component of actual LTI is not yet determinable. As a result, the Actual LTI presented for both the President and Chief Executive Officer and the Aggregate Other Named Executive Officers in the table includes the total award opportunity for the fiscal 2021 performance units. Only the conditionally earned element of the fiscal 2021 performance units is shown as being earned in the Summary Compensation Table.
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For fiscal 2021, the target pay mixes for our Chief Executive Officer and the average of our other named executive officers were as follows:
Fiscal 2021 Target Pay Mixes

Determining Executive Compensation
The committee is responsible for the review and approval of all aspects of the executive compensation program. The committee meets regularly each year to (among other items):
Establish for executive officers, and recommend to the Board for approval with respect to the chief executive officer, the annual base salary and MICP target opportunity for the current fiscal year
Determine the actual annual incentive compensation to be paid to each executive for services provided during the prior year
Establish for executive officers, and recommend to the Board for approval with respect to the chief executive officer, plan targets and performance measures for the performance period for performance units
Determine the number of performance units earned, if any, under the long-term incentive program for the performance period ending with the prior fiscal year
Determine restricted stock units and stock option awards and any other equity-based awards to be granted to executive officers
When establishing executive compensation, the committee takes many factors into account. These factors include shareholder value, our company’s performance compared to pre-established performance goals and objectives, objective and subjective considerations of each individual’s skills, performance and level of contribution towards desired business objectives, retention concerns, the individual’s tenure and experience with our company and in his or her current position, the recommendations of management and the independent compensation consultant, the individual’s current and historical compensation, the committee’s compensation philosophy, and comparisons to compensation levels and payouts of comparably situated executives (both those of our company and those of peer companies). The committee’s process utilizes input, analysis and review from a number of sources, including our company’s management, other independent directors of the Board, the committee’s independent compensation consultant, and market studies and other comparative compensation information as discussed below.
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The committee uses this information in conjunction with its own review of the various components of our executive compensation program to determine the base salary and annual short-term and long-term incentive targets and opportunities of the executive officers as a group and individually.
Role of Executive Officers in Determining Compensation
The committee meets with the Chief Executive Officer annually to review the performance of the other executives. The meeting includes a discussion of each executive officer’s performance for the year and a review of individual contributions towards achievement of our business goals. A summary of the performance review is presented to the full Board each year.
The committee considers input from the Chief Executive Officer and other select executives when developing and selecting metrics and performance objectives that may be referenced in the annual short-term or long-term incentive program, and evaluating performance against such pre-established metrics and objectives. The committee also receives recommendations from the Chief Executive Officer regarding base salary amounts, annual short-term and long-term incentive award amounts for the other executive officers. In determining the Chief Executive Officer’s compensation, the committee considers comparative compensation information and input from its independent compensation consultant.
Role of the Compensation Consultant
During fiscal 2021, the committee retained Pearl Meyer as its independent compensation consultant. The committee reviewed and confirmed the independence of such firm. The compensation consultant provides the committee with an annual compensation market analysis for the executives; makes recommendations on the executive pay programs; reviews, participates and comments on executive compensation matters; and provides updates on regulatory changes in compensation related issues and other developments and trends in executive compensation. In the most recently completed fiscal year, Pearl Meyer provided a recommendation to the committee regarding the terms of the proposed amendment to our Amended and Restated 2015 Omnibus Incentive Plan.
Market Competitiveness Review
The committee reviews recommendations from the independent compensation consultant on a peer group of companies about which competitive compensation data is obtained. In connection with establishing executive compensation for fiscal 2021, the committee worked with its independent compensation consultant in the peer group development process. There were no changes to such peer group for fiscal 2021. The peer group companies had annual revenue ranging from $2.9 billion to $11.7 billion (median $5.1 billion) and market capitalization ranging from $0.4 billion to $17.9 billion (median $3.8 billion). Both management and the committee believe that the peer group of 16 companies provided a robust statistical set of compensation data to serve as a basis for reviewing fiscal 2021 executive compensation.
The companies comprising the peer group used to establish fiscal 2021 compensation opportunities of the named executive officers are listed below:
Fiscal 2021 Peer Group
Anixter International Inc.
HD Supply Holdings, Inc.
Pool Corp.
Applied Industrial Technologies, Inc.
Henry Schein, Inc.
W.W. Grainger, Inc.
Beacon Roofing Supply, Inc.
Hill-Rom Holdings, Inc.
Watsco, Inc.
Covetrus, Inc.
MRC Global Inc.
WESCO International Inc.
DENTSPLY SIRONA Inc.
MSC Industrial Direct Co. Inc.
 
Fastenal Company
Owens & Minor Inc.
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Due to continued or expected M&A activity within the peer group, in December 2020, the committee, acting on the recommendation of its independent compensation consultant, replaced WESCO International Inc., Anixter International Inc. and HD Supply Holdings, Inc. with Quest Diagnostics Incorporated, Elanco Animal Health Incorporated and Envista Holdings Corporation. This is the peer group of companies for fiscal 2022.
The reports furnished by the compensation consultant provided the committee with market information at the 25th, 50th, and 75th percentiles for each executive position and pay component, and for total direct compensation, and compared the market compensation data to current pay for each executive. This market information is an important element reviewed by the committee, and provides a basis for adjusting a component of pay, or total direct compensation generally, above or below these ranges to recognize the specific circumstances of individual executive officers in a manner consistent with the stated objectives of the compensation program.
Shareholder Approval of our Executive Compensation Program
We continue to consider the perspectives of our shareholders in the design and administration of our executive compensation programs. Historically, Patterson’s shareholders have provided strong support of our executive compensation programs with the overwhelming majority of shares voted at our annual meetings approving, on an advisory basis, the compensation of our named executive officers. At last year’s annual meeting, our proposal regarding advisory approval of executive compensation was approved by 82.4% of the shares voted on such proposal.
Shareholder Engagement
As part of our efforts to continuously improve our governance practices, we conduct targeted shareholder engagement with certain of our institutional investors. Members of our management team and committee meet with shareholders and discuss a variety of topics, including those relative to our business performance and our executive compensation strategy.
Compensation Philosophy, Practices and Components
Compensation Philosophy
The committee is guided by the following objectives that it believes are key to the successful execution of our strategic business imperatives, enhancing growth opportunities and providing benefits to our shareholders:

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Compensation Practices
The committee leverages the following best practices in designing, administering and governing our executive compensation programs:
What We Do
What We Do Not Do
Position target executive pay levels generally at the peer median
Provide single trigger change-in-control cash severance payments, or change-in-control cash severance payments exceeding three times base salary and target annual incentives
Deliver the majority of our compensation in variable pay elements
Allow stock option repricing, discounted stock option granting, or cash out of underwater options
Use equity with multi-year vesting requirements to drive alignment with shareholders
Provide reload provisions in stock option grants
Promote stock ownership with executive and director stock ownership guidelines
Offer change-in-control tax gross-ups to our named executive officers
Reflect shareholder preferences in our program plans and designs, including clawback and double trigger protections
Pay dividends or dividend equivalents on unearned performance units or unvested restricted stock units
Cap payouts in our short-term incentive plan
Allow our executives or directors to hedge or pledge company stock
Review our pay for performance relationship annually
Conduct a compensation risk assessment
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Compensation Components
To assist in understanding the intended goals of the committee, we have described, at a high level, each of our primary compensation elements for fiscal 2021 in the following table:
Element
Purpose
Key Features
Annual Base Salary
 Provide a fixed level of compensation

 Reflect competitive practices
 Set salary levels based on an assessment of:

 Level of responsibility

 Experience and time in position

 Individual performance

 Future potential

 Competitiveness

 Internal pay equity considerations

 Salary levels are reviewed annually by the committee and adjusted as appropriate
Annual Short-Term Incentive Compensation
 Designed with the uncertainties stemming from COVID-19 in mind, tied short-term incentives for executive officers and other members of management to adjusted operating income for fiscal 2021

 Eliminated individual performance objectives for fiscal 2021 in the spirit of “we’re in this together”

 Linked pay to corporate performance
 Simple design framework given the uncertainty of operating in a pandemic-driven environment

 Performance results below $85 million in adjusted operating income would have resulted in no payout for fiscal 2021

 Reduced the upside payout leverage to reflect the difficulty of goal-setting
Annual Long-Term Incentive Compensation – Performance Units
 Provide executive officers with incentives to achieve long-term success through performance-based equity compensation with multi-year vesting requirements

 Align executive officers’ interests with the interests of our shareholders
 Fiscal 2019 and 2020 grants based 50% on 1-year free cash flow and 50% on 1-year adjusted net income with a 2-year cliff vesting restriction at the end of the 1-year performance period

 Fiscal 2021 grants based on three annual performance targets and financial metrics then subject to an rTSR modifier; first year performance objectives based 50% on 1-year adjusted net income and 50% on 1-year EBITDA leverage ratio
Annual Long-Term Incentive Compensation – Stock Options
 Align executive officers’ interests with those of shareholders through a focus on stock price performance and shareholder value creation
 10-year term

 3-year ratable vesting
Annual Long-Term Incentive Compensation – Restricted Stock Units (“RSUs”)
 Provide opportunities for equity accumulation and alignment with shareholders

 Support leadership retention objectives
 3-year cliff vesting
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Base Salary
The committee annually reviews base salaries for the executive officers to determine whether adjustment is warranted in consideration of the factors identified in the above table.
As noted above, from May 1, 2020 through July 31, 2020, our named executive officers experienced temporary base salary reductions of 30% (35% in the case of Mr. Walchirk). Because these cost reductions measures were designed to achieve immediate preservation of available working capital, base salary reductions did not modify the executives’ rights with respect to the calculation of annual or long term incentive awards or severance. Base salaries for our named executive officers and other members of management were restored beginning August 1, 2020, but there was no retroactive reinstatement of forgone pay.
Effective January 1, 2021, our named executive officers received base salary increases ranging from 2.5% to 10% in recognition of their performance and in consideration of the competitive market for comparable executives. In consideration of the macroeconomic uncertainty at the time, the committee determined to delay these merit increases that would have otherwise taken effect on July 1, 2020. Specific base salary increases are set forth in the table below.
Executive
Fiscal 2020
Base Salary
Temporary Base Salary
Reduction
Percentage
Fiscal 2021
Base Salary (Effective
January 1, 2021)
Percentage
Increase
(FY21 over FY20)
Mark S. Walchirk
$875,000
35%
$925,000
5.7%
Donald J. Zurbay
$541,000
30%
$557,200
3.0%
Eric R. Shirley
$457,000
30%
$468,400
2.5%
Les B. Korsh
$412,000
30%
$424,400
3.0%
Kevin M. Pohlman
$373,000
30%
$410,300
10.0%
For fiscal 2022, the committee approved an 8.1% base salary increase for our Chief Executive Officer and base salary increases ranging up to 4.0% for our other named executive officers. These increases were in recognition of their performance and in consideration of the market for comparable executives.
MICP
The named executive officers are eligible to earn annual cash incentive compensation under the MICP. For fiscal 2021, a cash incentive is payable if a specified level of performance is achieved, and the ultimate payout varies with performance. For fiscal 2021, the committee determined that annual cash incentives, if any, would be earned on the basis of adjusted operating income.
The fiscal 2021 payout curve and adjusted operating income performance goals were set in respect of the unprecedented economic uncertainty and the committee’s desire to establish a short-term incentive program that would serve to drive performance and incent management. As the company’s fiscal 2021 began in late April of 2020 and the committee desired to create a MICP against which management could be held financially accountable, goal setting occurred during a particularly challenging time period with significant uncertainty as to the magnitude and duration of the pandemic’s impact on the company. This uncertainty that was reflected in the goal-setting process included:
Disruptions in the company’s supply chains from shipping delays, which impacted goal calibration for both of our business segments;
Guidance from federal, state, and local governmental bodies and industry associations that routine dental care and routine veterinary care should be deferred, which impacted goal calibration for both of our business segments;
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Information from a leading dental association that more than 95% of dentists were reporting either seeing emergency patients only or not seeing any patients, which impacted goal calibration for our dental segment; and
Uncertain impact on meat packing operations, which impacted goal calibration for our animal health segment.
As the committee considered these various factors in MICP design and goal calibration, it focused on:
Setting performance targets in this climate that it believed were aligned with opportunities to reduce spending, increase efficiencies, maintain profitability, and opportunistically grow certain products and services;
Avoiding compensation windfalls from setting maximum performance goals too conservatively if the pandemic’s impact was negligible; and
Preventing the loss of motivational value from setting minimum performance goals too aggressively if the pandemic’s impact was severe in both magnitude and duration.
Actual incentive payouts under the MICP for our named executive officers were calculated as follows:
Level of
Funding
Adjusted Operating
Income ($M)
(100% weight)
Percent of Adjusted
Operating Income for
MICP Pool
Calculation ($M)
Actual MICP
Pool ($M)
None
Less than $85
0.0%
0
$0
In-the-Money
$85 – $200
15.0%
$200 x 15.0%
$30
Excess
Over $200
12.5%
$47.6 x 12.5%
$5.95
Actual Outcome
$247.6*
$35.95
*
Represents reported adjusted operating income of $248.7 million that the committee determined to exercise negative discretion to exclude the benefit of $1.1 million in certain non-GAAP costs and expenses.
As shown in the table above, based on the committee’s determination of actual results for fiscal 2021, the company’s performance yielded an MICP pool equal to $35.95 million. Funding at 100% of management’s aggregate targeted annual cash incentive compensation would have been achieved with $165.3 million of adjusted operating income and funding at the maximum level would have been achieved with $307.1 million of adjusted operating income. The actual fiscal 2021 MICP pool therefore enabled funding at 145% of management’s aggregate targeted annual cash incentive compensation.
Although actual adjusted operating income performance in fiscal 2021 was lower than fiscal 2020, the committee believed the 145% MICP funding level was appropriate because:
The MICP was designed in respect of the economic uncertainty that existed when the plan was designed and goals were set;
Although the company significantly outperformed its performance forecasts, the conservative payout slope prevented a management incentive compensation windfall; and
The company’s fiscal 2021 total shareholder return of 126.8% aligned with an above-target MICP funding result.
As such, the committee did not exercise any additional discretion beyond the $1.1 million negative adjustment noted above.
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With respect to each participant in the MICP pool, we converted each such person’s target opportunity (expressed as a percentage of base salary) into a percentage of the overall MICP pool. That percentage was ultimately multiplied by the $35.95 million MICP pool, yielding the following fiscal 2021 incentive payments for each named executive officer:
Executive
Fiscal 2021 Base
Salary
MICP Target
Award % of
Base Salary
Target MICP
Award
Payment as
a % of
Target
Total MICP
Payment
Mark S. Walchirk
$925,000
124%
$1,147,000
145%
$1,663,150
Donald J. Zurbay
$557,200
85%
$473,600
145%
$686,720
Eric R. Shirley
$468,400
60%
$281,000
145%
$407,450
Les B. Korsh
$424,400
60%
$254,600
145%
$369,170
Kevin M. Pohlman
$410,300
60%
$246,200
145%
$356,990
For fiscal 2021, the entire short-term incentive payment was attributable to adjusted operating income. Individual performance goals and objectives for each named executive officer were not considered in MICP payments for fiscal 2021 to account for the great uncertainty related to COVID-19.
Long-Term Incentives
Our fiscal 2021 long-term incentive program for named executive officers delivered 50% of the long-term incentive opportunity in performance units, 25% in stock options, and 25% in restricted stock units. The table below highlights the value and number of awards granted to each of our named executive officers (a thorough description of each vehicle follows).
Executive
Performance
Units
($ / #)
Stock Options
($ / #)
Restricted Stock
Units
($ / #)
Total
($)
Mark S. Walchirk
$1,625,000
$822,487
$812,505
$3,259,992
68,944
178,965
34,472
Donald J. Zurbay
$525,000
$265,725
$262,499
$1,053,224
22,275
57,819
11,137
Eric R. Shirley
$225,000
$113,884
$112,500
$451,384
9,546
24,780
4,773
Les B. Korsh
$225,000
$113,884
$112,500
$451,384
9,546
24,780
4,773
Kevin M. Pohlman
$225,000
$113,884
$112,500
$451,384
9,546
24,780
4,773
Note: The above performance units were granted on September 29, 2020 and the above stock options and restricted stock units were granted on July 14, 2020. The 50/25/25 mix between these awards is based on dollar value rather than the actual number of shares or units awarded. Under GAAP accounting and tabular proxy disclosure requirements, because performance goals have not been set for the second and third years in the 3-year cycle, only one-third of the target performance units may be disclosed in the Summary Compensation Table and the Grants of Plan-Based Awards Table. As such, the values of the performance units set forth in the above table do not equal those set forth in the Summary Compensation Table or the Grants of Plan-Based Awards Table. As the company has transitioned to a full 3-year cumulative performance program in fiscal 2022, next year’s proxy statement will show the second year of the fiscal 2021
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performance unit grant plus the full value of the fiscal 2022 – fiscal 2024 performance unit grant; however, the company considers the second and third year of the fiscal 2021 performance unit grants that will be disclosed in future proxy statements as part of the fiscal 2021 long-term incentive opportunity. Additional detail regarding the performance units appears in the footnotes to the Summary Compensation Table. Furthermore, other values in this table may not exactly equal those set forth in the Summary Compensation Table or the Grants of Plan-Based Awards Table due to rounding.
Fiscal 2021 Performance Units
The actual number of performance units that are earned and vested are based on the achievement of specific financial performance goals and rTSR results. Specifically, actual awards are linked to a three-year performance period that consists of three annual performance cycles. The performance results used to determine the actual award earned are calculated at the end of the three-year performance period by averaging the results of the three annual performance cycles, then adjusting such result based on 3-year relative total shareholder return.
Conditional Earning Potential
FY21
+
FY22
+
FY23
=
3-yr Average
Maximum
150%
175%
175%
167%
Target
100%
100%
100%
100%
Threshold
50%
50%
50%
50%
The first one-third of the fiscal 2021 performance units were conditionally earned based on one-year adjusted net income and one-year EBITDA leverage ratio objectives, each weighted 50%. Such weightings were selected to emphasize the importance of continued management focus on execution. The committee selected EBITDA leverage ratio as an additional performance objective to focus management on liquidity and compliance with debt covenants in a time of unprecedented uncertainty.
As noted above, following completion of the three distinct annual performance periods associated with the fiscal 2021 performance units, a cumulative rTSR modifier based on our performance against the S&P 400 Mid-Cap Index will be applied to adjust the amount conditionally earned based on performance, either up or down, by up to 20% to account for Patterson’s stock performance relative to its S&P 400 Mid-Cap Index peers.
Relative TSR Modifier
If Patterson’s relative TSR is:
Then the conditionally earned amounts are:
At or below the 30th percentile
Adjusted down by 20%
At or above the 75th percentile
Increased by 20%
Note: Adjustments for levels achieved between the 30th and 75th percentile are linearly interpolated.
The committee established the modifier as part of a hybrid approach to move away from exclusively using one-year performance period design, thereby increasing the alignment between executive compensation and longer-term shareholder gains. When applied to the conditional earning potential for fiscal 2021-2023, the modifier yields a revised maximum of 200% and a revised threshold of 40%. The committee regards this negative adjustment as an appropriate balancing of pay-for-performance considerations with retention considerations.
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As shown in the table below, based on our actual performance in fiscal 2021, the performance unit element of our long-term incentive plan funded at 150% of target.
FY 2021 Performance Goals for Named Executive Officers ($M)
Level of
Achievement
Adjusted Net Income ($M)
(50% weight)
EBITDA
Leverage Ratio
(50% weight)
Payout % of Target
Threshold
$95.4
3.5x
50%
Target
$146.8
2.6x – 2.8x
100%
Maximum
$154.0
2.3x
150%*
Actual Outcome
$189.0
Average 2.2x
150%
*
The maximum payout for the first year of the fiscal 2021 performance units is 150%. For the second and third performance measurement years of such awards the maximum payout is 175%.
For the second annual performance measurement period under the fiscal 2021 performance units, the committee has determined to use non-GAAP adjusted earnings per diluted share (100% weight) as the operative performance goal, subject to the same modifier. The committee selected this performance objective, which is commonly used by companies in our peer group, for its simplicity as a measure of profitability and to provide award recipients with a metric they can monitor, track and understand. This approach is consistent with modifications made to the performance unit component of the fiscal 2022 long-term incentive plan design, as described below.
Fiscal 2021 Stock Option Grants and Fiscal 2021 Restricted Stock Units
Stock options continue to be an important element of our long-term incentive strategy as they create direct alignment between management and shareholder interests. Multi-year vesting requirements require long-term growth in our stock price for our executives to receive value from these awards. Stock options granted in fiscal 2021 under our long-term incentive program vest one-third each year, starting one year after grant, and expire after 10 years.
While the committee adheres to an overall executive compensation program that is heavily performance-based, we also recognize our objectives of leadership retention and stock ownership. Therefore, 25% of the long-term incentive value is delivered in service-based RSUs. RSUs granted in fiscal 2021 under our long-term incentive program vest in full on the third anniversary of the grant date.
We believe that the design of these elements of long-term incentive compensation inspire a long-term perspective, encourage shareholder value creation and align the interests of management and shareholders.
Our Incentive Programs for Fiscal 2022
As we execute against our strategic business objectives, we continue to review our incentive compensation structure to ensure it is consistent with our compensation philosophy and strategy and supports our commitment to create value for all shareholders.
With our fiscal 2022 MICP, the committee sought to revert back to a traditional short-term incentive framework for executive officers rather than the approach taken in fiscal 2021 due to uncertain macroeconomic conditions, including the COVID-19 pandemic. The committee considered the need to create a compelling vision for the future, using a historical STI approach and the need for a growth and profitability focus at the corporate and individual business unit levels. To this end, the fiscal 2022 MICP is based on consolidated adjusted operating income, consolidated free cash flow and, for the business unit heads, business unit adjusted operating income. Additionally, based on the additional economic clarity available to our business as the economy emerges from the pandemic and actual fiscal 2021 performance results, the
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committee approved fiscal 2022 adjusted operating income performance goals that exceeded fiscal 2020 and fiscal 2021 performance targets and fiscal 2020 and fiscal 2021 actual performance results. Additionally, in reverting back to its historical approach to incentives, the committee set maximum performance goals at 120% of target versus the 115% of target that they had previously used as a means of recognizing some of the lingering economic uncertainty. Individual executive awards are also subject to an individual performance modifier of plus or minus 15%, which is then applied with a payout scale ranging from 50% to 175% of target. Actual MICP payments will be made based on our performance against these goals and an assessment of each executive’s performance against individual performance goals and objectives. Such individual performance goals and objectives include financial, operational, customer-focused and employee experience parameters, including ESG metrics, set forth as part of our balanced scorecard.
Our fiscal 2022 long-term incentive plan design maintained the same incentive vehicle mix and weights (i.e., 50% performance units, 25% stock options, and 25% restricted stock units) that were used for our fiscal 2021 long-term incentive construct, but the stock options and restricted stock units now utilize three-year pro-rata vesting rather than three-year cliff vesting. To focus the company on execution, the performance unit component for fiscal 2022 is based on 3-year cumulative non-GAAP adjusted earnings per diluted share which is payable at 50% of target if a threshold level of performance is achieved and a maximum payout of 160% of target. Total shares conditionally earned over the 3-year cycle will then be subject to a 3-year relative TSR modifier based on Patterson’s TSR against the S&P 400 Mid-Cap Index, which 25% up or down modifier results in an adjusted payout equal to 37.5% of target if a threshold level of performance is achieved and an adjusted maximum payout of 200% of target. The committee regards this negative adjustment as an appropriate balancing of pay-for-performance considerations with retention considerations.
This structure maintains management’s focus on earnings per share while preserving a relative performance component and a multi-year performance measurement period. The committee believes this revised incentive framework for fiscal 2022 remains strongly aligned with shareholder interests and is consistent with shareholder feedback.
Other Executive Compensation Arrangements, Policies and Practices
Stock Ownership Guidelines
We believe that promoting share ownership aligns the interests of our executives and non-employee directors with those of our shareholders and provides strong motivation to build shareholder value. Under our stock ownership guidelines, which were last reviewed and revised by the committee in June 2020, the following persons are expected to own shares of a value equal to a multiple of their annual base pay, or annual cash retainer, as follows:
Chief Executive Officer – 5x annual base salary
All Direct Reports to the Chief Executive Officer – 3x annual base salary
Non-Employee Directors – 5x annual cash retainer
Executives and non-employee directors are expected to achieve target levels over a period of five years from the effective date of the guidelines. If an executive or non-employee director is below the guideline, he or she is expected to retain 50% of the net shares (after satisfying tax obligations) resulting from the vesting, settlement or exercise, as applicable, of all stock options, restricted stock awards, restricted stock units, performance units, or other equity-based awards. As of July 16, 2021, our executives and directors were in compliance with applicable stock ownership guidelines.
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“Clawback” Provisions
Our Amended and Restated 2015 Omnibus Incentive Plan, which replaced our Amended and Restated Equity Incentive Plan (under which no new awards may be granted), contains “clawback” provisions. If the committee determines that a participant has taken any action that would constitute “cause” or an “adverse action,” as the plan defines such terms, while providing services to the company, or after termination of such services, all rights of the participant under the plan and any agreements evidencing an incentive award the participant then holds will terminate and be forfeited. In addition, the committee may require the participant to return to the company any shares received, any profits or any other economic value realized by the participant in connection with any awards or any shares issued upon the exercise or vesting of any awards. In addition, the plan incorporates the Sarbanes-Oxley Act of 2002 automatic forfeiture standard for certain participants in connection with material noncompliance, as a result of misconduct, resulting in an accounting restatement. In addition, all awards under the plan are subject to forfeiture or other penalties pursuant to any clawback or forfeiture policy of the company, as in effect from time to time, and such forfeiture and/or penalty conditions or provisions as determined by the committee and set forth in the applicable award agreement.
Hedging and Pledging of Company Stock
Our Securities Trading and Information Disclosure Policy prohibits short sales of company securities (a sale of securities which are not then owned) and other speculative trading of company securities. No director, officer or other employee is permitted to enter into any arrangement or agreement involving writing or trading in options, warrants, puts, calls or other derivative securities on company securities, to engage in any hedging transactions including the use of prepaid variable forwards, equity swaps, collars or exchange funds, or to hold company securities in a margin account or otherwise pledge company securities as collateral for a loan. In addition, such policy discourages the use of standing and limit orders on company securities, except under an approved Rule 10b5-1 plan.
The Executive Nonqualified Excess Plan
We maintain an executive nonqualified deferred compensation plan under which our named executive officers may participate. We do not make any contributions to such plan and all amounts outstanding thereunder consist solely of participant contributions and are fully vested. The amounts deferred into such plan may become payable during employment upon designated fixed payment dates or following a termination of employment (subject to a six-month delay in certain circumstances) or a change in control of our company. Further information regarding nonqualified deferred compensation is reported in the Nonqualified Deferred Compensation Table below.
Capital Accumulation Plan
Patterson formerly made available a deferred compensation, restricted stock purchase plan (the “Capital Accumulation Plan”). Under the Capital Accumulation Plan, participants could defer annually up to 25% of their pre-tax compensation to be used to purchase shares of restricted stock. The stock purchased with the corresponding salary deferral was bought at a 25% discount from the market price of our common stock at the beginning of the calendar year or the end of the calendar year, whichever was lower. Participants elected the initial deferral period between three and five years. Participants could elect to defer the compensation beyond the initial deferral period, with the restrictions also continuing for the additional deferral period, with the minimum additional deferral period being five years. If the participant voluntarily left employment during the initial deferral period, 100% of the purchased restricted stock and any salary deferred were forfeited. The Capital Accumulation Plan was terminated for new participants, effective January 1, 2019.
Health, Welfare and Retirement Benefits
Patterson provides a full range of benefits to its executives, including the standard medical, dental and disability benefits generally available to our employees. We also sponsor a qualified 401(k) plan which allows participants to make plan contributions on a pre-tax basis.
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Perquisites and Other Personal Benefits
Patterson provides the named executive officers with the following perquisites and other personal benefits that the committee believes are reasonable and consistent with our overall compensation philosophy:
Automobile Reimbursement: Formerly, each executive employed by Patterson was provided the use of a car under the fleet program maintained by our company. Effective January 1, 2021, Patterson no longer offers an executive automobile lease or any other vehicle allowance to anyone newly hired or promoted to a Vice President position or above. Nevertheless, executives who are currently under a vehicle lease were “grandfathered” into the program and remain eligible for the executive car program with certain program modifications. In particular, the ability to purchase leased cars at the end of the lease for a processing fee will be discontinued for any lease ending on or after January 1, 2023. Instead, the executive may purchase their current vehicle under such a lease by paying the fair market value of the vehicle as determined by a general industry-accepted valuation source.
Executive Physicals: The executives are encouraged to participate in an executive health program at the Mayo Clinic. A comprehensive evaluation emphasizing all aspects of preventative care is conducted by physicians who are specialists in Internal Medicine and Preventative Medicine. The cost of the physical is reimbursed by our company.
Executive Life Insurance Premiums: The executives participate in a company-sponsored executive life insurance program. This program provides our named executive officers with a life insurance benefit equal to three times their base salary plus the targeted annual incentive under the MICP. The life insurance benefit is capped at $1,300,000. Premiums, which are set each June, are paid by our company through a payroll gross-up.
Amounts Reimbursed for the Payment of Taxes: Patterson pays an amount necessary to cover executives’ tax obligations for certain perquisites and other personal benefits. In fiscal 2021, Patterson reimbursed executives for the payment of taxes on automobile reimbursement, executive life insurance premiums and commuting expenses.
Company Contributions to the ESOP: Through and including fiscal 2021, our company made an annual contribution to the leveraged Employee Stock Ownership Plan (“ESOP”) based on company performance and other considerations equal to a certain percentage of an executive’s eligible compensation, subject to certain statutory limitations. This contribution was available generally to all our U.S. employees, subject to plan requirements. In June 2021, the committee determined to suspend the ESOP for any new participants. For fiscal 2022, contributions will be made to the company’s 401(k) instead of the ESOP.
Incentive Trips: Expenses incurred by the executive and family members while attending special events or trips scheduled as rewards for incentivizing sales or other business achievements and for family members traveling with the executive for any purpose, are reported as imputed income to the executive.
Commuting Expenses: Patterson pays amounts necessary to cover the commuting expenses of one named executive officer who resides in locations other than in the Minneapolis/St. Paul metropolitan area.
Employment and Other Severance, Change-in-Control and Related Agreements
Patterson has agreements with its named executive officers providing them with certain severance and change-in-control benefits in exchange for their agreement to certain restrictive covenants. When establishing those benefits and the level of those benefits, the committee considered the competitive market for comparable executives and the benefits provided by comparable companies. The committee believes that competition for executive talent primarily affects the aggregate level of the target total direct compensation opportunity. However, the committee also believes it is critical to our company’s long-term performance to offer other compensation opportunities, including severance and change-in-control benefits, that
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are broadly commensurate with competitive alternatives. The committee also believes that the issuance of inducement equity awards and other one-time equity awards as consideration for the restrictive covenants contained in such agreements serves to align named executive officer and shareholder interests and, as to the inducement awards, were necessary to attract and retain senior executive talent.
In particular, we have entered into individual agreements with our named executive officers that provide for severance benefits upon involuntary termination without cause. Such benefits, receipt of which is conditioned upon executive’s execution and delivery of a release of all potential claims against us, consist of:
18 months of base salary (24 months in the case of our President and Chief Executive Officer);
Cash incentive compensation equal to an average of the last three years of actual MICP incentives;
Proration of the current year MICP incentive based on actual performance; and
18 months of paid COBRA premiums.
Our individual agreements with our named executive officers also provide certain change-in-control benefits, in lieu of the above-referenced severance benefits, that are triggered if either of the following occurs within 24 months after a change in control (as defined in each agreement):
We terminate the executive’s employment with us for a reason other than cause (as defined in the agreement), or
The executive terminates his or her employment with us for good reason (as defined in the agreement).
Such change-in-control benefits, receipt of which is also conditioned upon executive’s execution and delivery of a release of potential claims against us, consist of:
24 months of base salary (36 months in the case of our President and Chief Executive Officer);
Cash incentive compensation equal to the then-current target MICP incentive;
Proration of the current year MICP incentive based on target performance; and
18 months of paid COBRA premiums.
The committee designed these agreements to help ensure that our executive team is able to evaluate objectively whether a potential change in control transaction is in the best interests of Patterson and its shareholders, without having to be concerned about their future employment. We believe that retaining the services of our key executives during a change-in-control scenario is critical to maximizing shareholder value. These agreements help ensure the continued services of our executive officers throughout the change in control transaction by giving them incentives to remain with us rather than seeking alternative employment or being recruited to a competitor during a highly uncertain time. Our agreements providing for change-in-control benefits do not contain excess parachute payment tax gross-up provisions.
The committee reviewed prevalent market practices in determining the severance amounts and the events that trigger payments under the agreements. The committee determined that the amounts and triggering events were appropriate and designed to encourage decision-making that is in the best interest of Patterson. The committee considered competitive market data and governance best practices information provided by its independent compensation consultant. The committee also evaluated the cost to us of these arrangements and the potential payout levels to each affected executive officer under various scenarios. In approving these agreements, the committee determined that their cost to us and our shareholders was reasonable and not excessive, given the benefit conferred on us. See “Potential Payments upon Termination or Change-in-Control” for further information regarding such agreements.
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Our equity plans and inducement awards issued outside such plans also provide change-in-control benefits. As described below, our Amended and Restated 2015 Omnibus Incentive Plan only provides such benefits in connection with a change in control and a subsequent event (a “double trigger”), which we believe enables us to better balance the employee’s need for certainty with the interests of our shareholders.
Our Amended and Restated Equity Incentive Plan, under which no new awards may be granted, provides that awards issued under that plan are fully vested and all restrictions on the awards lapse in the event of a change in control, as defined in such plan.
Under our Amended and Restated 2015 Omnibus Incentive Plan, if the surviving or acquiring company in a change in control assumes our company’s outstanding incentive awards or provides for their equivalent substitutes, such plan provides for accelerated vesting of incentive awards following a change in control only upon the termination of the employee’s service, a material reduction in an employee’s base salary, a discontinuation of participation in certain long-term cash or equity benefits provided to comparable employees, a significant change in job responsibilities or the need to relocate, provided these events occur within two years of a change in control. The inducement awards issued outside our equity plans provide for the same change-in-control benefits.
Other Related Considerations
Compensation Risk Assessment
The committee annually considers the designs of our executive compensation programs relative to risk. This assessment includes an analysis of our overall compensation philosophy, the program value and plan design, and our governance processes to ensure that we are promoting superior performance in a responsible way relative to risk. In addition, in May 2021, the committee worked with Pearl Meyer in the assessment of the potential for risk stemming from our compensation programs, including financial risk, operation risk, reputation risk and talent risk. Following its assessment, including its review of the report of its compensation consultant, the committee concluded that our executive compensation programs are unlikely to create a material adverse effect on Patterson.
Impact of Tax and Accounting Treatment on Compensation
Pursuant to the Tax Cuts and Jobs Act, the Section 162(m) performance-based compensation exception was repealed with respect to taxable years beginning after December 31, 2017, except that certain transition relief is provided for remuneration provided pursuant to a written binding contract which was in effect on November 2, 2017 and which was not modified in any material respect on or after such date. As a result, compensation paid to any of our covered employees in excess of $1 million per taxable year generally will not be deductible unless, among other requirements, it is intended to qualify, and is eligible to qualify, as Section 162(m) performance-based compensation pursuant to the transition relief provided by the Tax Cuts and Jobs Act. No assurance can be given that any compensation paid by Patterson will be eligible for such transition relief and, therefore, eligible for the Section 162(m) performance-based compensation exception. The committee will continue to monitor the applicability of Section 162(m) to our ongoing compensation arrangements and intends to continue to compensate our named executive officers in a manner consistent with the best interests of Patterson and its shareholders. The committee also considers the impact of Section 409A of the Code, and in general, our executive plans and programs are designed to comply with the requirements of that section to avoid the possible adverse tax consequences that may arise from non-compliance.
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Summary Compensation Table
The following table sets forth information concerning the compensation of our named executive officers for fiscal 2019, 2020 and 2021. The terms and conditions of our agreements with our named executive officers are described below in “Potential Payments upon Termination or Change-in-Control.”
Name and Principal Position (a)
Fiscal
Year
Salary
($)(b)
Bonus
($)
Stock
Awards
($) (c)
Option
Awards
($)
Non-Equity
Incentive
Plan
Compen-
sation
($) (d)
Change in
Pension Value
and Non-
qualified
Deferred
Compensation
Earnings ($)
All Other
Compensation
($) (e)
Total
($)
Mark S. Walchirk
2021
802,658
-
1,359,111
822,487
1,663,150
-
110,439
4,757,845
President and Chief Executive
2020
870,840
-
2,437,510
824,383
1,600,375
-
126,396
5,859,504
Officer
2019
850,005
-
2,361,346
336,472
656,250
-
204,558
4,408,631
Donald J. Zurbay
2021
498,328
-
439,080
265,725
686,720
-
91,546
1,981,398
Chief Financial Officer and
2020
538,388
-
787,517
266,340
671,381
-
58,792
2,322,418
Treasurer
2019
439,522
-
1,453,341
453,667
278,906
-
24,080
2,649,516
Eric R. Shirley
2021
420,222
-
188,177
113,884
407,450
-
22,849
1,152,582
Former President, Patterson Dental
2020
455,837
-
337,488
114,146
345,492
-
34,574
1,287,537
Les B. Korsh
2021