Pat­ter­son Cos. Pres­i­dent and CEO Mark Walchirk blunt­ly as­sessed the com­pany's first-quar­ter re­sults: They did not meet ex­pec­ta­tions.

The Mendota Heights-based dis­trib­u­tor of den­tal and ani­mal health sup­plies lost $4.5 mil­lion, or 5 cents per share, af­ter earn­ing $30.8 mil­lion, or 33 cents per share in the first quar­ter last year.

The com­pany had to re­cord a $28.3 mil­lion re­serve for an an­tic­i­pated legal set­tle­ment. Ac­count­ing for that re­serve and deal am­or­ti­za­tion costs, ad­just­ed earn­ings were 26 cents per share, com­pared with 44 cents a year ago and the 34 cents ana­lysts were ex­pect­ing.

For the pe­riod end­ed July 28, the com­pany in­creased rev­e­nue 2.5 percent to $1.3 bil­lion. In­ter­nal sales ad­just­ed for cur­ren­cy ex­chang­es and prod­uct-sell­ing re­la­tion­ships in­creased by 2.3 percent.

But Walchirk was more con­cerned with earn­ings and gross-mar­gin de­clines.

"While our on­go­ing in­itia­tives to im­prove the cus­tom­er ex­peri­ence and en­hance sales ex­e­cu­tion helped drive im­proved top line per­form­ance, these re­sults were off­set by com­pe­ti­tive pric­ing pres­sures, which neg­a­tive­ly im­pact­ed our mar­gins," Walchirk said in the earn­ings re­lease.

Walchirk

Patterson also updated its earnings guidance for the remainder of their fiscal 2019. The company lowered its guidance for earnings to 84 to 94 cents per share after offering initial guidance of $1.43 to $1.53 per share when announcing the fourth-quarter results in June. The new adjusted earnings per share moves to $1.40 to $1.50 per share, down from the initial guidance of $1.73 to $1.83 per share.

Pat­ter­son Cos. op­er­ates two busi­ness seg­ments. The ani­mal health seg­ment, which ac­count­ed for a­bout 62 percent of total rev­e­nue in the quar­ter, was a bright spot with in­ter­nal sales in­creas­ing 6 percent to $825.2 mil­lion.

Sales of the den­tal seg­ment con­tinued to strug­gle at $506.1 mil­lion, down 2.7 percent com­pared with last year.

In February 2016, Patterson and two main dental-supply competitors were made part of class-action lawsuit alleging they conspired against other competitors. Walchirk told analysts on the earnings call that Patterson believes the claims are without merit and they are not admitting to any liability but decided to enter into settlement discussions.

Pat­ter­son hasn't en­tered into a de­fin­i­tive court-ap­proved set­tle­ment in the case but be­gan dis­cus­sions in Au­gust and made the $28.3 mil­lion re­serve to cov­er po­ten­tial claims.

Shares of Pat­ter­son closed Thursday down 5 percent at $22.54. Year-to-date shares are down 35.3 percent, and over the past 52 weeks shares have trad­ed in the range of $20.23 to $40.90 per share.

Pat­rick Ken­nedy • 612-673-7926