Pandemic causes a year like no other for Patterson, other Minnesota public companies

Patterson Cos. was on the cusp of a turnaround last spring when the coronavirus pandemic hit — and with it another bumpy year ensued.

The Mendota Heights-based company distributes supplies and equipment to dental and veterinary businesses, sectors that saw big dips in demand as COVID-19 spread and states ordered public health restrictions.

While the journey was not easy, Patterson had redefined its operating values in 2019, unknowingly setting up a framework for dealing with the pandemic crisis.

"We've talked about how there was no playbook for a pandemic," said Chief Executive Mark Walchirk. "But our teams literally wrote a playbook to help our customers deal with the situation."

One way or another, every business on the Star Tribune 50 list of Minnesota public companies was affected by COVID-19 restrictions and the economic declines caused by the pandemic. Half on the list lost revenue in 2020, and more than half saw profits decline or losses widen.

Target, as well as a few others, saw the opposite effect, being named essential businesses and quickly responding to changing customer patterns.

Revenue for the 50 companies as a whole increased 5.5% to a cumulative $621.8 billion. The three largest companies on the list — UnitedHealth Group, Target and Best Buy — grew revenue throughout the year. Those gains more than offset declines seen by 23 companies.

UnitedHealth, the list's leader, is the largest company in Minnesota by revenue, and also among the 10 largest public companies in the U.S. In 2020, its annual revenue increased 6% to $257.1 billion and accounted for more than 40% of the total revenue on the list.

Whether they increased sales or were caught by shutdowns that affected revenue, the pandemic forced companies to adjust to work-from-home situations, continually reinvent health and safety plans for front-line workers and find new supply lines and new ways to connect with customers.

The actions at Patterson Cos., the distributor of products and supplies to dental, veterinary and production animal markets, mirrored what a lot of companies experienced — from the first realizations that the emerging pandemic would have serious effects on the economy to communication plans as markets opened up.

Patterson officials first took note in February 2020 as the novel coronavirus enveloped Wuhan, China, and spread to the rest of that country.

"Things almost on a daily basis started to evolve; it became more apparent that this wasn't something that was happening in another part of the world. It was coming here," Walchirk said. "I don't think anybody could really understand or predict what was going to happen."

Patterson was prepared in some respects. Walchirk said the crisis-management work throughout the pandemic year was informed by work done as the company put together a new mission statement in 2019.

In March, the virus and business disruptions escalated quickly, and leadership at Patterson and other companies formed COVID-19 task forces to monitor the changing environment. Patterson's committee was quickly expanded to include dozens of leaders from across the company. It started meeting daily, then twice daily.

Managers and information technology professionals had to quickly figure out work-from-home scenarios. Some companies had to shut factories, either because of state mandates or figuring out how to keep employees safe and healthy.

Winnebago Industries, No. 20 on the Star Tribune 50, closed its factories for three to six weeks. Demand then increased so much as outdoor recreation skyrocketed in popularity that it had to scramble to produce enough inventory. For the year ended Feb. 27, revenue was up 22%.

Simultaneous to a shift to work from home — and learning how to use technology such as Zoom for meetings — was a near halt on corporate and leisure travel. Sun Country Airlines, No. 43 on the list, saw revenue decrease 43% in 2020.

Dental offices were deemed nonessential except for emergencies, cutting off one of Patterson's key customer bases.

The Patterson task force chose early on to focus on the health and safety of employees, business continuity of customers and the company doing its part in reducing the spread of the virus.

"Those three principles really helped to guide our decisionmaking," Walchirk said. "We still talk about them today."

There were no furloughs. Salaried employees and managers volunteered to work alongside front-line workers when COVID-19 affected staffing at distribution centers. "It was a pretty neat example of how people really did feel that we are all in this together and helping one another out," said Andrea Frohning, Patterson's head of human resources.

From the emergence of the pandemic, companies throughout Minnesota vowed to put their employees first. Chad Brinsfield, chair of the management department at University of St. Thomas' Opus College of Business, believes they have done that.

"They have really embraced their employees and caring for their employees. And they've elevated their employees' well-being in the hierarchy of organizational priorities," said Brinsfield, who also does business consulting. "And I see that being driven from the top down."

Brinsfield, who does research on trust and what fosters commitment in organizations, said that some of Minnesota's top managers have become "thought leaders in how to manage through this." That emphasis on employees' well-being is then passed on by those workers to customers.

For Patterson, communication became a central focus. "There were a million questions that we felt we needed to answer," Frohning said. "But we owed that to them."

It's the same with Graco, No. 26 on the list. Pat McHale, the Minneapolis-based company's chief executive, was accustomed to making frequent trips to different production facilities and hanging out with workers on the floor as well as holding formal meetings. He made his first video March 17 and has made 60 more since then to communicate with employees.

Companies assigned people to scour CDC guidelines and state mandates to devise plans to keep workers safe on the floor. They had to increase budgets to make sure there was social distancing and the right equipment.

High-tech thermal scanners were put in place in Polaris factories, new cleaning protocols at Graco and Ecolab.

Some companies laid off workers as orders waned in the first part of the year. Patterson didn't, but there were furlough days and some salary cuts. And the company, like many others, added enhanced sick leave and benefits for COVID-19.

As dental clinics closed or had their business severely curtailed, Patterson developed customized advice that included summaries of CDC and industry association protocols. The company, like many others, also moved to preserve its liquidity, drawing down on revolving credit agreements and slashing budgets where it could.

"You kind of go into survival mode," Walchirk said.

The moves helped, but even with business increasing toward the end of the year, the lean spring left 28 companies on the Star Tribune 50 with declining profits or deeper losses for 2020. Those dragged the collective profits of the companies on the list down 7.6% for the year.

Patterson's fiscal year ended in April, but for the calendar year, the company lost $481.4 million, after a gain of $48.1 million during 2019.

The company's COVID-19 task force has stopped meeting daily. Its focus has shifted from crisis management to longer-term planning, although it continues to monitor virus rates and now vaccination rates. It now needs to figure out how to bring people back to offices and jump-start the progress Patterson made in 2019, reviewing budgets and technology.

"The story we will write at Patterson with regard to the pandemic will be how our values really showed up during the crisis," Walchirk said. "How we set our COVID guiding principles, built our task force, engaged our team; how we communicated openly, transparently and often. How we showed up for our customers. … Those are the key learnings for me."

Patrick Kennedy • 612-673-7926